Eligible parents can receive child and dependent care tax credits, if they meet a certain set of criteria, regardless if they are married or not. Although sometimes used interchangeably, these child and dependent care tax credits are not to be confused with deductions. Tax credits reduce your tax obligation on a dollar-for-dollar basis. Deductions, on the other hand, lower the amount of income on which you can be taxed. Because a dependent can only be claimed by one parent – typically the custodial parent or the parent the child lives with for the majority of the year – tax credits cannot be split. One parent can, however, give up the right to claim the child and dependent care credit and allow the other parent to use it by filing IRS Form 8332, Release/Revocation of Release of Claim for Child by Custodial Parent.
Only one parent is eligible to receive child and dependent care tax credits per tax year in the event that the parents are no longer married.
Childcare Tax Credits
There are myriad rules about who can claim tax credits and for what purposes. Generally speaking, if you are the custodial parent, you have a dependent under the age of 13, you are paying for care provided by a non-parent or dependent and you are using the care to afford yourself of the opportunity to work or look for work, you can claim the credit. You cannot claim the credit if your childcare provider is your child's parent or a dependent sibling under 19, and you cannot claim the credit for non work-related care. For example, hiring a babysitter so you can go to the gym or out to a movie will not qualify. To claim the credit, you can file Form 1040, Form 1040A or Form 1040NR.
Earned Income Qualifier
In order to claim the child and dependent care tax credit, you must have earned income during the year, and your filing status must typically be single or head of household. Earned income is money received as compensation from a job, self-employment or military combat pay. Payments from Medicaid, unemployment, Social Security or scholarships are not considered earned income. Child support is also not considered earned income, nor is any money earned while incarcerated and being paid a prison wage.
Providing Identifying Information
In order to qualify for the child and dependent care tax credit, you must provide the name, address and taxpayer identification number of the individual providing care, or the employer identification number for the organization providing childcare. If you receive supplemental, non-taxable financial childcare assistance from a social services agency to subsidize your childcare expenses, you must factor that amount into your deduction. According to the IRS, for the tax year 2018, the amount of qualifying work-related expenses that can be used to assess the credit is $3,000 for one qualifying person, or $6,000 for two or more qualifying people. To calculate the amount of your credit, multiply your work-related expenses by a percentage of your adjusted gross income outlined on your personal tax return.
- IRS.gov: Topic Number 602 - Child and Dependent Care Credit
- IRS.gov: Child and Dependent Care Expenses
- IRS.gov: Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent
- Credit Karma: Tax deductions vs. tax credits: What’s the difference?
- Internal Revenue Service. "Credit for Child and Dependent Care Expenses," Page 2. Accessed Feb. 13, 2020.
- Internal Revenue Service. "Topic No. 602 Child and Dependent Care Credit." Accessed Dec. 5, 2019.
- Internal Revenue Service. "Credit for Child and Dependent Care Expenses," Page 5. Accessed Dec. 5, 2019.
- Internal Revenue Service. "Credit for Child and Dependent Care Expenses," Pages 1, 5. Accessed Dec. 5, 2019.
- Internal Revenue Service. "Publication 503: Child and Dependent Care Expenses," Pages 12-13. Accessed Feb. 13, 2020.
- Internal Revenue Service. "Prior Year Products." Accessed Jan. 30, 2020.
- Internal Revenue Service. "2019 Instructions for Form 2441," Pages 1-2. Accessed Dec. 5, 2019.
- FSAFEDS. "Dependent Care FSA." Accessed Dec. 5, 2019.
Lisa McQuerrey has been an award-winning writer and author for more than 25 years. She specializes in business, finance, workplace/career and education. Publications she’s written for include Southwest Exchange and InBusiness Las Vegas.