Friday, February 18, 2011

Topic 602 - Child and Dependent Care Credit

If you paid for the care of a qualifying individual so that you (or your spouse if you are married) could work or look for work, you may be able to claim the credit for child and dependent care expenses. If you are married, both you and your spouse must have earned income, unless one spouse was either a full-time student for 5 months of the tax year or was physically or mentally incapable of self-care. An individual is physically or mentally incapable of self-care if, as a result of a physical or mental defect, the individual is incapable of caring for his or her hygiene or nutritional needs, or requires the full-time attention of another person for the individual's own safety or the safety of others. The expenses you paid must have been for the care of one or more of the following qualifying individuals:

Your dependent who was under age 13 when the care was provided and who was your qualifying child (under the rules for qualifying child)

Your spouse who was physically or mentally incapable of self-care and who had the same principal place of abode as you for more than half of the year

Your dependent who was physically or mentally incapable of self-care and who had the same principal place of abode as you for more than half of the year, or

An individual who was physically or mentally incapable of self-care and had the same principal place of abode as you for more than half of the year, and who would have been your dependent except that the individual had gross income greater than or equal to the exemption amount, the individual filed a joint return, or the individual was the dependent of another taxpayer

For divorced or separated parents or parents who live apart at all times during the last six months of the year, refer to the topic Child of Divorced or Separated Parents or Parents Living Apart in Publication 503, Child and Dependent Care Expenses. Note that a noncustodial parent may not treat a child as a qualifying individual even if the noncustodial parent may claim an exemption for the child.

If a person is a qualifying individual for only a portion of the tax year, then only those expenses incurred when the person is a qualifying individual are included in calculating the credit. For more information on who is a dependent or qualifying child, refer to Publication 501, Exemptions, Standard Deduction, and Filing Information.

In addition to the conditions just described, to take the credit, you must meet all the following conditions:

You must provide the taxpayer identification number (usually the social security number) of the qualifying individual.

You must file a joint return if you are married.

Your payment must be made to a care provider who is not someone you (or your spouse if you are married) can claim as your dependent, or your child who is under age 19, even if he or she is not your dependent. Also, your payment must be made to a provider who is not your spouse or the parent of your child who is your qualifying individual, and

You must report the name, address, and taxpayer identification number, (either the social security number, or the employer identification number) of the care provider on your return. If the care provider is tax exempt, you need only report the name and address on your return. You can use Form W-10 (PDF), Dependent Care Provider's Identification and Certification, to request this information from the care provider. If you do not provide information regarding the care provider, you may still be eligible for the credit if you can show that you exercised due diligence in attempting to provide the required information.

If you qualify for the credit, complete Form 2441 (PDF) with Form 1040 (PDF) or Form 1040A (PDF). If you received dependent care benefits from your employer (this amount should be shown on your Form W-2 (PDF)), you must complete Part III of Form 2441. You cannot use Form 1040EZ if you claim the child and dependent care credit.


The credit is generally a percentage of the amount of work-related child and dependent care expenses you paid to a care provider. The percentage depends on your adjusted gross income. The credit is subject to limits that depend on earned income, the taxable year, and the number of qualifying individuals. These dollar limits must be reduced by the amount of any dependent care benefits provided by your employer that you may exclude from your income. Refer to Publication 503, Child and Dependent Care Expenses, for additional information.


If you pay someone to look after your dependent or spouse in your home, you may be a household employer. If you are a household employer, you may have to withhold and pay social security and Medicare taxes and pay federal unemployment tax. For more information, refer to Publication 926, Household Employer's Tax Guide, or to Topic 756

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