A couple can claim the Child and Dependent Care Credit — commonly called the "child care credit" for short — if they pay someone to watch the kids while they're at work. But suppose one spouse plans to go back to school this fall. Can you still claim the credit? It depends.
Generally, the credit is equal to 20 percent of the first $3,000 of qualified expenses related to caring for one child under age 13, or $6,000 for two or more children underage 13. Therefore, your maximum credit is typically $600 for one child and $1,200 for two or more children. A higher percentage is available for certain low-income taxpayers.
What expenses qualify for the child care credit? The credit can be claimed for:
To qualify, the expenses will need to have been incurred for you and your spouse to be "gainfully employed." A married couple is gainfully employed if one spouse works full time and the other works full time, part time or is a full-time student. A full-time student attends classes for at least five months (not necessarily consecutive) out of the year.
Say your spouse took a four-week course earlier this year and now has enrolled full time at college, beginning in September. You'll end up with child care costs because your spouse will be at school and you work full time. That means you might claim the child care credit, subject to the usual limits.
One more thing to remember — the qualified expenses are further limited to the earned income of the lower-earning spouse. This could affect couples where one spouse attends school. During the months a spouse is a full-time student, the tax law presumes an earned income of $250 for one child and $500 for two or more children.
"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, and all Chicagoland area.
Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain.Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at firstname.lastname@example.org.
For more free resources, such as Online Advisor Newsletters, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.
Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720
To better serve our clients and friends, to keep you up-to-date and informed, our blog is a resource for tax tips and overall accounting related articles. We hope you find this useful!