For working parents, paying for childcare can be an arduous task. From the earliest stages of infancy until they enter school, children require care. As they advance into adolescence and adulthood, so does their need for assistance with everyday tasks like meals and laundry — not to mention setting up housekeeping arrangements!
Despite all your efforts, there may still come a point when you require assistance from the government in order to afford the cost of raising your child. That’s where tax credits come into play!
The Child and Dependent Care Tax Credit: What You Need to Know
Working parents are eligible for tax relief through the Child and Dependent Care Tax Credit. This tax incentive can reduce the amount of federal taxes they must pay by as much as $1,050 – or even more if their income is low enough.
The Child and Dependent Care Tax Credit offers parents a deduction or credit up to certain limits if they provide child care services for their own children or those of other family members (or qualify themselves as dependents for tax purposes).
Keep in mind that you’ll need to meet certain financial criteria in order to be eligible for this benefit – but don’t let that stop you from taking advantage of flexible work schedules!
Eligibility for the Child and Dependent Care Tax Credit
Working parents can avail themselves of this tax credit if they have at least one qualifying child. If your offspring are under the age of 13, you will not be eligible for any reimbursements. Furthermore, in order to qualify for this program one must be providing childcare services to their dependents – no exceptions!
All working parents may claim either dependent or non-dependent children and must maintain accurate records to substantiate their eligibility. This can prove a daunting task, especially if childcare arrangements are subject to change from time to time! Here are just a few examples of validations that could help expedite matters:
If an individual has more than one child and provide full-time childcare for any of these individuals during a single tax filing period then that individual could claim both as dependents on their return; or Any time five consecutive quarters have passed wherein care was provided for any of the aforementioned children by any parent(s) who provides daycare for them; or If care is provided to more than one dependent child with the same parent(s)-regardless if each child is of different ages-if all minors under one’s custody reside in the same household while they are being cared for by you;
How Much Can You Claim as a Tax Credit?
The Child and Dependent Care Tax Credit is a delectable morsel indeed! If you’re an employer, this provides one more incentive to assist working parents with the caregiving experience.
The maximum amount of savings you can claim for 2018 for each qualifying child depends on their age at the end of the tax year. For example:
For children under 6 years old, you can only claim $1300 in eligible expenses.
For children between 6 – 17 years old (who have not yet started high school), a maximum of $3,000 can be claimed in eligible expenses.
All other eligible dependents over the age of 17 are eligible for up to $5,000 worth of qualifying childcare costs.
Who Qualifies for the Child and Dependent Care Tax Credit?
The Child and Dependent Care Tax Credit (C&DCCTC) is a tax-free allowance for eligible caregiving costs incurred in 2017. Specifically, you can claim up to $3,000 of eligible child and dependent care expenses – from janitorial services to high-end nannies – without incurring any tax liability whatsoever!
To be eligible for the credit, you must have paid such expenditures within the previous year. If your income exceeds certain limits per tax year, you might still qualify even if there has been an increase in one’s salary–as long as it remains below these figures!
While most working parents are aware of the many benefits provided by this credit, there may still be times when they find themselves applying for it; especially if they need assistance with their taxes or simply want to maximise their tax savings.
Who Cannot Claim the Child and Dependent Care Tax Credit?
The Child and Dependent Care Tax Credit is available to qualifying individuals who provide care for a dependent, either of their own or someone not related.
In order to be eligible for this credit, the presence of one or more of the following must be present:
Parents whose tax burden is diminished by providing care must submit IRS Form 2441 in order to claim any part of it.
Is There a Limit on How Much You Can Claim?
It’s commonly accepted that wealthy individuals are able to reap the greatest benefits from using their tax credits. However, this isn’t necessarily true in regards to the Child and Dependent Care Tax Credit; there is no upper limit on its allocation!
In line with this deduction’s liberal justifications for eligibility, anyone can claim the benefit if they provide care services for an individual under the age of 13 or have a dependent who requires such nursing-type assistance – regardless of income level. This makes it feasible for those who may not be rich but still require childcare-related assistance as well as those with young dependents seeking assistance for related tasks at home.
Other Important Facts About the Child and Dependent Care Tax CreditHow to Get Your Tax Credit
Undoubtedly, the Child and Dependent Care Tax Credit is an effective resource for parents who are working and provide care services for their children. In fact, this federal assistance can sometimes help offset taxes owed. To obtain this tax credit, all you need to do is take care of your dependents or offer such services to them – it’s as simple as that!
The IRS has provided a helpful tool that can assist in determining which form of child-related care qualifies for the Child and Dependent Care Tax Credit. They recommend that you consider these factors before identifying what type of care you may provide:
Is the dependent-care service temporary or continuous? You are eligible for the full amount of your credit if providing childcare services is merely an interim measure intended to tide over any time consuming obligations like school vacation from one week on end until resuming in the new academic year again. If however, arranging daycare packages becomes more permanent -however brief – then it would be considered more costly than regular babysitting arrangements. If there arise any unexpected circumstances requiring additional attention to be given during any period of caregiving, such as illness or accidents; then this could lead to substantial expenditures necessitating longer periods of leave away from work.
Conclusion
Every single year, millions of working parents utilize the Child and Dependent Care Tax Credit to offset the cost of providing care for their dependents. This invaluable tax relief program can be utilized by both spouses – even if they are not married – as long as one parent claims the credit on behalf of another.
With ample room to claim this valuable credit, it is critical that you take advantage of it! To learn more about how to maximize the benefits of this valuable child care assistance, contact a qualified tax advisor today.
