Working families often have to weigh whether it’s more cost-effective to work or to pay for care when they have young children or other dependents in the household. The Child and Dependent Care tax credit may help make that decision a little easier.
What Does the Credit Cover?
Typically, you can claim the Child and Dependent Care tax credit if you pay another person to take care of your child or dependent while you either work or look for work. To qualify:
- A child must be 12 years of age or younger, and you must claim them as a dependent on your tax return
- Any other person for whom you claim this credit must be either your spouse (if they are unable to care for themselves) or a dependent you claim on your tax return. In both cases, the individual must have lived in your household for at least half the year.
What Are the Limitations?
While the Child and Dependent Care tax credit can provide valuable tax savings, there is some fine print to consider. You cannot claim this credit if:
- The caregiver is your spouse or the parent of the child
- The caregiver is another dependent or child (18 or younger) claimed on your tax return
Additionally, you (and your spouse, if you are married) must have earned income from a job in order to claim this credit. If you’re married, you must also file a joint tax return.
As stated prior, this credit is only available to individuals who have to pay for care because they are either working or actively looking for work. Attending school does count as “working” for the purpose of this credit.
Have Additional Questions?
If you’re not sure whether or not you can claim the Child and Dependent Care tax credit or if you have additional questions, reach out to the crew at Taxation Solutions, Inc. We are here in San Antonio to help you understand the tax code and how it applies to your unique situation. Call us today to find out how we can be of service.