Almost any parent will agree – childcare is expensive. But for working parents, childcare is a necessity. Somebody has to watch the kids while you spend the majority of the day at your job. That’s why it’s vital for working parents to understand what tax deductions are available to them if they pay for childcare.
Working parents who pay for childcare may then qualify for the child and dependent care credit, which is designed to help working parents or guardians pay for the many expenses involved in raising a child. While the tax break is meant for working parents, people who were full-time students or unemployed for a portion of the year may also qualify.
If you paid for a daycare center, nanny, summer camp or other provider to care for a qualifying child under 13 (or a disabled dependent of any age), it’s possible you could qualify for a tax credit of as much as 35 percent of qualifying expenses of up to $3,000 for one child or dependent, or up to $6,000 for two or more children or dependents.
The credit varies depending on your earned income and is based on the expenses paid to ensure child or dependent care services in order for parents to work.
Be aware that parents must meet a number of criteria before qualifying for the child and dependent care credit, including all of the following:
If you meet those criteria, then what exactly is tax deductible?