How to File for the Child Care Credit

Get a credit against your income taxes for expenses you paid to care for your child or other dependent.

Difficulty: Moderate

Instructions

Things You'll Need:

• IRS Forms
• Financial Calculator
• Computers
• Tax Preparation Software

Form 2441

1. Fill in Part 1 with the care provider's name, address, identifying number and amount you paid. You must have all this information. The identifying number of an individual is his social security number. For an organization, it is called an EIN.

2. Go to Part 2 if you did not receive any dependent care benefits from your work. You must fill out Part 3 only if you received such benefits.

3. Fill in line 2 of Part 2 with the names of your qualifying person or persons, their social security numbers and the amount you paid in eligible expenses.

4. Fill in line 3 of Part 2 by adding the amounts you paid in eligible expenses for all qualified persons. Don't include more than $2,400 per qualified person. The total on line 3 cannot be more than $4,800.

5. Fill in line 4 of Part 2 with your earned income. Earned income is money you earn from working, not from investments.

6. Fill in line 5 of Part 2 with your spouse's earned income if you have a spouse. If your spouse is a full-time student or is disabled, put $2,400 as earned income if you have one qualifying person or $4,800 if you had two or more.

7. Fill in line 6 of Part 2 with the smallest number - your eligible expenses, your earned income or your spouse's earned income.

8. Fill in line 7 of Part 2 with your adjusted gross income. This can be found on line 34 of the 1040.

9. Compare your adjusted gross income on line 7 with the chart on line 8 to find out what percentage of eligible expenses will be your credit. The maximum percentage is 30 percent if your income is under $10,000. The minimum percentage is 20 percent if your income is over $28,000.

10. Fill in line 8 of Part 2 with the percentage you have just determined.

11. Multiply the percentage on line 8 times the number on line 6. This is your child and dependent care credit.

12. Write the credit amount on line 9 of Part 2 and also on line 41 of the 1040.

Qualifying Individual

13. Determine that care expenses were paid for at least one person who was under 13 years of age or for a person who was mentally or physically incapable of caring for himself or herself.

14. Verify that the person was your dependent.

15. Or, verify that the person would have been your dependent except that his or her gross income was too high.

16. Or, verify that the person is your child and is not your dependent only because of a divorce or separation agreement.

17. Or, verify that the person is your spouse.

18. Make sure the qualifying individual lived in your home when the expenses were incurred.

Eligible Expenses

19. Calculate how much was paid to a child care center or other place that provided care.

20. Calculate how much was paid for nursery school or kindergarten.

21. Calculate how much was paid for after-school care or activities.

22. Calculate how much was paid for day camps.

23. Calculate how much was paid for someone to provide care in your home. These costs can include meals and housing.

24. Make sure that none of the costs were paid to your own child unless he was over 18 years old or that the money paid was not to anyone who is your dependent or your spouse.

25. Separate the expenses by person if there is more than one qualifying person.

Tips & Warnings

• Many activities that you send your child to for training or enjoyment can qualify as child care expenses.
• You can include all or part of the expenses of a domestic worker in your home as care expenses if the worker has some responsibility to care for the qualifying person.
• Expenses paid to a relative who is not your dependent are eligible. Expenses paid to your child, however, are not eligible unless he or she is over 18 years old before the end of the tax year.
• Expenses for regular schooling beyond kindergarten are not child care expenses.
• Overnight camps or activities are not child care expenses.