Tax Credit Rules for Daycares
Daycare is one of the most expensive, yet necessary expenses for parents and legal guardians. Some two-parent households only have one income because the other parent's income would serve just to pay the daycare costs. If you paid a caregiver to take care of your child during the year, you can receive a credit on your tax return for the costs if you follow the regulations enforced by the Internal Revenue Service (IRS).
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Qualifying Person
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To receive the tax credit, the daycare service must be provided for a qualifying person. A qualifying person is a dependent child age 12 or under who lives with you for more than half of the year in question. In some circumstances, there are exceptions for spouses or other adult dependents who are physically or mentally unable to take care of themselves.
Caregiver
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There are certain rules that apply to the caregiver of your qualifying person, too. The caregiver must be 19 years old or older and must have a federal taxpayer ID number, which is easily obtained from the IRS. The caregiver can be anyone, as long as it isn't the other parent of the qualifying person, a spouse or anyone you can claim as a dependent on your tax return.
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Work Status
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You can only receive a daycare credit if you are enlisting care so you and your spouse, if you have one, can work or look for work. You and your spouse, if married, must have earned income as an employee or a self-employed person. There's an exception if one of you attends school full-time or can not care for yourself so you could not have cared for the qualifying person.
Total Spent
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There is a limit of money you can claim on your daycare tax credit. It can vary by year so you should always check with the IRS for the current allowance. For the 2010 tax year, you could claim up to $3,000 for one qualifying person. The maximum moves up to $6,000 for two or more qualifying individuals.
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