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Are Child Care Expenses Tax Deductible?

Are Child Care Expenses Tax Deductible?

If you’ve spent money this year on caring for a child or dependent, you may be able to claim a credit or write off the amount as a deductible when you file your income tax return at the end of the year. Read on for the hows and whys.

How to Use the CDCTC

The Child and Dependent Care Taxpayer Credit, or CDCTC, allows you to deduct child care expenses, or money you spent on caring for a spouse or dependent, from your income. The credit can be claimed on your federal income tax return, and it can be up to 35% of the qualifying expenses, depending on your AGI (adjusted gross income).

What Is A Qualifying Individual?

The care that you provided must be for:

  • a child who is 12 years old or younger, or was when the care was provided
  • a spouse or dependent who is mentally and/or physically incapable of caring for themselves

Each qualifying person has to be identified on your tax return. Another factor that you need to take into account is that you need to show that the care was provided so that you could work or so that you could seek gainful employment. You must also prove this for your spouse, if you’re filing jointly.

The CDCTC Checklist

Before you claim this credit, you need to make sure you check all the necessary boxes.

Here they are:

  • You (and your spouse if you’re filing jointly) have earned income from salary, tips, or net earnings from self-employment.
  • You have not paid your spouse, the parent of your qualifying person, your child who will be younger than 19 when the return is filed, or someone you identify as your dependent on your return, for the care of the qualifying person.
  • Your filing status is married jointly, single, head of household, or qualifying widow(er) with dependent child.
  • You have reduced the qualifying amount by the total amount of any benefits provided by your employer for the care of your qualifying person.
  • The qualifying person lived or has lived with you for more than half of this year. (Exceptions are made for deaths, births, and children of separated or divorced parents)

CDCTC Nitty Gritty

The maximum creditable expense under this credit is $3000, but this goes up to $6000 if your household has more than one dependent. The expenses will be limited to the income of the lower-income spouse, if you are married. For spouses who are full-time students or incapable of self-care, the law assumes an income of $250 every month if the house has one dependent, and $500 a month if there are more than one dependents.

Make sure you identify the care provider(s) on your tax return.

If all this seems too confusing to deal with on your own, call your local income tax service provider for assistance.

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