Credit for child care and dependents: what counts as eligible expenses?

Mparents who bear the costs of childcare benefit from the Credit for child care and dependent care. Although the credit is intended for working parents or guardians, it may also apply to taxpayers who were full-time students or unemployed for part of the year.

You may be entitled to a tax credit on your Taxes 2021 if you paid a daycare, babysitter, summer camp or other care provider to care for an eligible child under age 13 or a disabled dependent of any age.

For a child or dependent, up to 35% of eligible expenses for $3,000 ($1,050)or until $6,000 ($2,100) for two or more children or dependents.

Expenses eligible for the child and dependent care credit

While you may know that child care expenses qualify for the child and dependent care credit, the IRS considers much more than the cost of child care when calculating the credit. Eligible expenses include:

  • A licensed babysitter or dependent who provides child care.
  • The cost of employing a cook, housekeeper, maid or cleaner to care for the child or dependent.
  • Even for sport or activity-based camps, day camp or summer camp fees are eligible if the camp was chosen to provide care while the parent(s) were at work. Overnight camps, on the other hand, are not eligible.
  • Before and after school care costs for children under the age of thirteen.
  • Expenses for a nurse, home help or other carer for a disabled dependent.

Remember that expenses for tuition, tutoring or overnight camps are not eligible as eligible expenses.

Special circumstances

Because every family is unique, the IRS has a number of exceptions to the qualifying rules. Because of these exceptions, more families can benefit from the credit.

  • Even if the other parent has the right to claim the child as a dependent under the divorce or separation agreement, the custodial parent (the parent with whom the child spends the most nights in the year) can claim the credit.
  • Even if you cannot declare a disabled adult as a dependent because they have too much gross income or because you or your spouse may be declared as a dependent by someone else, you can claim the merit of his care.
  • The IRS waives the requirement that your spouse have earned income if they are a disabled adult.
  • The IRS considers your spouse to have earned income for each month they were a full-time student and attended college for at least five months during the tax year.

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