Press "Enter" to skip to content

The Child and Dependent Care Tax Credit Returns Big Dollars to Your Wallet

Good news for working families! If you pay child care expenses, you can go up to $4,000 back for 1 child and up to $8,000 back for 2+ children. The expanded Child and Dependent Care Tax Credit can lower your tax bill and makes the credit fully refundable to ensure that lower-income households can benefit. This is an important new tax relief that helps you offset some of the costs of caring for disabled children or dependents.

Am I eligible?

To qualify, you must have paid an eligible care provider for one or more of the following:

  • Children age 12 and under you claim as a dependent on your tax return
  • Your spouse (if this person is unable to care for themselves and has lived in your home for at least half the year)
  • Any additional person claimed as a dependent on your return, such as an elderly or disabled relative, who cannot care for themselves and has lived in your home for at least half the year

Who can claim the credit

You can claim the credit if you (or you and your spouse if you are filing a joint tax return) pay a provider to care for one or more eligible people so that you can work, look for work, or go to school. school and your income level are within the income limits set for the credit. however, the amount of the credit decreases when the individual’s or household’s income reaches a certain income level.

Like most taxes, understanding eligibility and calculating how much credit you are entitled to can be confusing. However, working families and people in southeast Pennsylvania and southern New Jersey who need it most can avoid the confusion and get free professional help from an IRS-certified campaign for families in workers (CWF) tax preparers.

Changes for the 2021 tax year (the taxes you file in 2022):
  • The number of eligible expenses increases from $3,000 to $8,000 for one eligible person and from $6,000 to $16,000 for two or more eligible people
  • The percentage of expenses eligible for the credit increases from 35% to 50%. This means that if you spent $8,000 on eligible child care expenses, you could receive up to $4,000 (50%) as a refundable credit.
  • The start of credit reduction increased from $15,000 to $125,000 of Adjusted Gross Income (AGI)
  • The maximum amount you can contribute to a flexible spending account for dependents and the amount of tax-free employer-provided dependent benefits is increased from $5,000 to $10,500

The child and dependent care credit is a tax credit rather than a tax deduction (see the differences here). This tax credit directly lowers your taxes, dollar for dollar, reducing the amount of taxes you owe early on. For example, a $1,000 tax credit reduces your tax bill by $1,000. And, new this year, you can receive up to 50% of your expenses in the form of reimbursement.

Restrictions on who can provide care

You can claim credit for money you paid for care if the person you paid is not one of the following:

  • Your partner
  • A parent of the cared-for child. For example, you cannot claim credit if you are paying your ex-husband or ex-wife to care for a child you have together.
  • Anyone listed as a dependent on your tax return
  • Your child, 18 or younger, whether or not they are listed as dependents on your tax return. For example, you couldn’t pay your 17-year-old child to look after his eight-year-old brother and then claim the credit.

CWF can help you qualify for the Child and Dependent Care Tax Credit!

Get FREE, professional help from an IRS Certified Tax Professional at CWF to take advantage of this opportunity to lower your tax bill and increase your refund! Childcare and dependent care have been particularly difficult for families over the past couple of years, and it’s a great way to help you get some of your hard-earned money back.

Thanks to the efforts of President Biden and Congress, the American Rescue Plan Act of 2021 (enacted March 11) included this credit which is much more generous than in the past and potentially refundable, so you may not have to pay tax to claim the credit. You only need to meet the requirements. Join the nearly 50,000 people who depended on FCF last year for tax benefits.

Be First to Comment

Leave a Reply

Your email address will not be published.