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Tax credits: Child and dependent care credit
 If
you pay someone to look after Junior or another dependent while
you and your spouse are working or looking for work, you may be
eligible for the child
and dependent care tax credit.
This credit covers a percentage of the costs a taxpayer
pays to have someone care for young children or an adult who is
unable to chare for him- or herself. There is a dollar limit on
the expenses toward which you can apply the credit and the credit
is larger for people who make less money.
General guidelines require that the person being cared
for is:
- A child under age 13 whom you can claim as a dependent;
- A spouse who is mentally or physically unable to
care for himself or herself;
- Any dependent who was physically or mentally not
able to care for himself or herself, and for whom you can claim
an exemption.
Other requirements for claiming this credit:
- You must qualify for a filing status other than
married filing separately
- The payments for care can't be made to someone
who is your dependent, or someone under age 19.
If you qualify for the child and dependent care credit,
you can't use Form
1040EZ. You must filed Schedule
2 along with Form
1040A, or Form
2441 with Form
1040.
If you received dependent care benefits from your
employer (this amount should be shown in box 10 of your Form W-2),
you must complete part III of Schedule 2 (Form 1040A) or Form 2441.
Don't forget to report the name, address and taxpayer
identification number -- the Social Security number or the employer
identification number -- of the care provider on your return.
Finally, if you pay someone to look after your dependent
or spouse in your home, you may be a household employer. If you
are, you may have to withhold and pay Social Security and Medicare
tax and pay federal unemployment tax -- collectively referred to
as the nanny
tax. For more information, see IRS
Publication 926, Household Employer's Tax Guide.
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