If you have to put your child in daycare so you can work or look for work, it can give you a child care tax credit -- not actually a deduction. You can also take this credit if you're married and both you and your spouse both need daycare to do your jobs. When you're unmarried, however, there can be only one credit -- it's not possible to divvy it up between you.
Just because you work doesn't automatically entitle you to the child care tax credit. Paying a babysitter when you go out for dinner doesn't count toward your child care expenses in the eyes of the IRS. Neither does paying the babysitter so you can work while your spouse sleeps. You can't claim the credit if the person you pay for daycare is your spouse, your child's parent, or another dependent, such as an older child. If you do qualify, you get a credit of up to 35 percent of the first $3,000 of your child care expenses if you have one child -- or $1,050 maximum. The maximum credit is $2,100 if you have two or more children.
You can only claim the credit if the child in daycare is under 13 and is also your dependent in the eyes of the IRS. If he turns 13 partway through the year, you count expenses up to that point -- not afterwards. You can also claim the child care credit if you pay for an older child or other dependent who is disabled or can't otherwise care for himself. Paying your significant other's daycare bills won't get you a tax break if his kid isn't your dependent.
Who Can Claim
The obstacle to splitting the tax credit is that detail about the child being your dependent. A child can only be a dependent on one tax return: married couples can claim a child together, but otherwise only one parent can claim each dependent -- and that's the parent who's eligible to qualify for the child care tax credit. If you and your partner are unmarried and have a kid, you can't both claim the dependent exemption or the daycare credit. If you and your spouse are now exes, only one of you -- usually the custodial parent -- takes the deduction.
If you and your ex share custody, the one of you with whom the child lives most often during the year is usually the one who claims him as a dependent. The custodial parent can't share the tax break, but she can give it up. The parent giving up the dependent has to attach form 8332 to her tax return. If either parent wants to write the other a check to share some of the savings from the child care credit, that would be perfectly legal.
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