|
|
 |
 |
 |
 |
 |
 |
 |
| |
What is the Child and Dependent Care Tax Credit?
The Child and Dependent Care Credit is a tax benefit that helps families pay for the child care they need in order to work or look for work. The credit is also available to families that must pay for the care of a spouse or an adult dependent who is incapable of caring for himself or herself. You can claim both the Child and Dependent Care Credit AND the Earned Income Credit.
The Child and Dependent Care Credit can reduce the amount of federal income tax a family pays in two ways:
- For families who do not owe taxes at the end of the year, this credit can give them back some or all of the federal taxes withheld from their paychecks during the year.
- For families who owe taxes, the credit can lower the amount they must pay the IRS.
|
| Many states have Child and Dependent Care Tax Benefits!
If you live in Arkansas, California, Colorado, Delaware, the District of Columbia, Hawaii, Idaho, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Montana, Nebraska, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, Vermont or Virginia, your state also offers a state child care tax provision to offset child care expenses.
Twelve of these states offer a refundable tax credit: Arkansas, California, Colorado, Hawaii, Iowa, Louisiana, Maine, Minnesota, Nebraska, New Mexico, New York and Oregon. In these states, low-income families that don't owe income tax can still receive a refund in the amount of the state's Child and Dependent Care Tax Credit. For more information, contact your state department of revenue. |
|
|
However, unlike some of the other tax credits available, families that earn too little to pay federal income tax cannot use this credit.
Since the Child Tax Credit is now refundable, families with child care expenses can take advantage of both the Child Tax Credit AND the Child and Dependent Care Credit. In fact, by claiming the Child and Dependent Care Credit, which is applied first to reduce or eliminate tax liability, families may receive a higher Child Tax Credit refund!
Am I eligible for the Child and Dependent Care Credit?
- You are eligible for a credit up to $2,100 (for 2 or more dependents, or $1,050 for one dependent) if you:
- paid for child care in 2006 for one or more child under age 13 living with you, or a disabled adult who lived with you; AND
- you needed care for your dependent(s) in order to work or look for work. (If married, both spouses must be working or looking for work, or one spouse may be a full-time student, or unable to care for him or herself.); AND
- the amount you paid for dependent care in 2006 was less than your income for the year. (If married and filing a joint tax return, you must have paid less for care than the income of the spouse with the lowest earnings.)
Families can claim only a limited amount of their child care expenses. Families with one child or dependent can claim up to $3,000 in these expenses and families with more than one child or dependent can claim up to $6,000. Eligible families will receive a credit worth between 20 percent and 35 percent of these expenses, depending on their income.
In general, the credit can only be claimed for a child who is claimed as a tax dependent, but there are special rules for children of divorced or separated parents. For information about these rules, call the IRS toll-free at 1-800-TAX-1040 or the National Women's Law Center at (202)588-5180.
How do I claim the Child and Dependent Care Credit?
You must file a federal income tax return (either a 1040 or 1040A) and attach a separate "schedule" or form with the return. If you file the Form 1040, attach Form 2441. If you file the Form 1040A, attach the Schedule 2 form.
For free copies of these forms, visit www.irs.gov or call the IRS at 1-800-TAX-FORM.
Additional CDCC Resources
Information on this page is from a free fact book by the Center on Budget and Policy Priorities. Download a free copy of this fact book (pdf) for additional information on Child Tax Credits, including Dependent Care Credits, and details about how to use the CDCC credit to get even more money back with the Child Tax credit.
The National Women's Law Center (NWLC) also has materials on the CDCC, as well as state-level child and dependent care tax provisions. Call NWLC at (202) 588-5180, or visit their website.
Families can also get free information about this tax credit by calling the IRS toll-free at 1-800-TAX-1040 or visiting www.irs.gov for their CDCC publication. Hearing impaired people can call the IRS at 1-800-829-4059. Many tax forms are also available at post offices and libraries.
Back to main Tax Credits page
|
|
| |
|
|
|
|
