You may be eligible for a credit on your return if you paid someone to care for your child, dependent or spouse last year. In order to qualify for the credit, you must meet the following criteria:
- The care provided must have been necessary so that you could work or look for work. If you are married, the spouse must also have been working, looking for work or attending school for you to be eligible for the credit.
- A valid Social Security number must be provided for each qualifying person used to claim the credit. You must include the name, address, and taxpayer identification number for the care provider. The taxpayer identification number can be the social security number of the individual or the EFIN of the business that provided the care.
- If the care provider's SSN/EFIN is not known, select the box which states "Provider did not give identification" when completing Form 2441. After checking the box, you must select the reason for not providing identification.
- The dependent or child must have been under age 13 or physically or mentally incapable of caring for themselves.
- To qualify for the credit, you and your spouse must both have earned income. If the spouse is enrolled full time in school or is disabled, an exception applies (complete page 2 of the 2441 Form).
- The expenses are limited to $3,000 per child or a maximum of $6,000 for two or more dependents. Your credit amount is dependent on your income and can be between 20 and 35% of the expenses. The program will calculate the credit for you when you enter your eligible dependents and expenses.
- If your employer contributes to a dependent care plan, you cannot claim a credit for the amount paid by your employer. If you do not use the full amount the employer has contributed (listed in Box 10 of your W-2), the remaining amount is added to your taxable income.
For Tax Year 2021 only
The child and dependent credit for the tax year 2021 only will be a refundable credit. The amount of eligible expenses increases from $3,000 to $8,000 for one child and from $6,000 to $16,000 for more than one child. The percentage of expenses eligible for the credit increase from 35% to 50% and the phaseout income amounts increase from $15,000 to $125,000 capping at 20% when AGI reaches $400,000.
For more information, please see Publication 503 and the Instructions for Form 2441.