When it comes to saving money on child care expenses, parents should consider every resource that is available to them.
This includes not only vouchers and subsidies that help pay for daycare fees and other expenses in the moment but also tax deductions for children that only come into play after you have already paid for child care.
These tax resources include the Child Care Tax Credit and the Child and Dependent Care Tax Credit. Together, these two tax policies help make it easier for families to afford the high cost of raising a child.
The Child Care Tax Credit provides up to $2,000 (per child) back on your taxes as long as the child:
- Lives with you.
- Was 16 or younger at the end of the most recent calendar year.
- Cannot file a joint tax return.
- Has eligible citizenship or residency in the U.S., Mexico or Canada.
In addition to these criteria, your child may need to meet certain other requirements for you to be able to receive the credit.
This child tax credit is available to anyone whose income is at most $200,000 if filing alone or $400,000 if filing joint taxes. If your tax bill gets reduced to zero and you have not used your entire Child Care Credit, you can get a refund for up to $1,400 of the credit.
Another important tax credit that helps with child care is the Child and Dependent Care Tax Credit. This credit works similarly to the Child Care Tax Credit, but it has different requirements and general rules.
The child and dependent tax deductions allow you to get back a portion of the money you have paid throughout the year for child care for a child who is under 13. The portion you can get back can be anywhere from 20% to 30% of your child care expenses (up to $3,000).
If you have more than two children or dependents, the credit rises to a maximum of $6,000. Keep in mind, however, that no portion of this credit is refundable once you have reduced your tax bill to zero.
By Admin –
