Child care can be a significant monthly expense, as much as an average rent payment if you've got more than one child. The Internal Revenue Service is willing to help you out a little if you're struggling with these costs. The child and dependent care tax credit is nonrefundable, so it only does you any good if you owe the IRS money at the end of the year – it can erase or at least reduce your tax debt. It won't compensate for all of your child-care costs, and you must meet a lot of requirements, but after-school programs do count.
Teenagers don't help you qualify for the child-care tax credit. The IRS reasons that if a child is age 13 or older, she's perfectly capable of taking care of herself while you're away from home. Of course, an exception exists if she's disabled and can't be left alone. Otherwise, this credit is limited to children age 12 or younger. For example, if your child turns 13 in July, but attended after-school care through June, the costs count because she was only 12 when she attended the program.
Another catch is that your child must attend the after-school program so you can work – just giving mom or dad some down time doesn't count. If you're married, both you and your spouse must work, or your spouse must be a full-time student. If you're involuntarily unemployed and job-hunting while your child attends the after-school program, this counts as well.
Although it's a bit of a catch-22, you must also have earned income to qualify for the child-care tax credit, and unemployment compensation isn't earned income. If you collect unemployment all year, you can't claim the credit for child care costs incurred while you looked for a job unless you also had some other source of income that qualifies. If you're married, both you and your spouse must have earned income unless your spouse is a full-time student.
Calculating Your Credit
The child-care credit is calculated based on up to $3,000 of your costs if you have one child, or up to $6,000 of your costs if you have two or more. You can add all costs of work-related child care – such as summer camps and services by private providers – to your after-school expenses to reach this total. Depending on your income, your credit is equal to a percentage of your costs. If your adjusted gross income is less than $15,000, you can claim 35 percent of your costs, or $1,050 maximum for one child. The percentage gradually drops off as you earn more, and if your income is $43,000 or more, you can only claim 20 percent. If you earned $43,000 and had $6,000 in childcare costs for your two children, your credit would be $1,200. If you earned only $14,999, it would be $2,100.
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