To claim the credit for child and dependent care expenses, you must meet ALL of the conditions below:
- Your filing status may be single, head of household, qualifying widow(er) with dependent child, or married filing jointly.
- The care was provided so you (and your spouse if filing jointly) could work or look for work. However, if you did not find a job and have no earned income for the year, you cannot take the credit or the exclusion.
- The care must be for one or more qualifying persons.
- The person who provided the care was not your spouse, the parent of your qualifying child, or a person whom you can claim as a dependent. If your child provided the care, he or she must have been age 19 or older by the end of the tax year, and he or she cannot be your dependent.
- You report the required information about the care provider on Line 1 (Step 1 in TaxSlayer program) and, if taking the credit, the information about the qualifying person on Line 2 (Step 2 or Step 3. in TaxSlayer program).
- You must have earned income during the year.
- You must identify the childcare provider on the tax return.
- Any dependent care benefits paid by a dependent care benefit plan are less than the total amount of expenses being claimed. If the benefits form your dependent care plan or employers dependent care benefits is more than the expenses, the excess will be included on the return as income.
For tax year 2021, the American Rescue Plan will make the following changes:
- The child and dependent credit will be a refundable credit for tax year 2021.
- 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%
- The phaseout income amounts increase from $15,000 to $125,000 capping at 20% when AGI reaches $400,000.