CHILD CARE CREDIT: YOU DON'T HAVE TO LIVE IN A SHOE
You don't have to be the "Old Woman Who Lived in a Shoe" to be eligible for child care credit. If you are the head of a household with children or other dependent(s), you may be eligible for some tax savings.
The child care credit is a dollar-for-dollar tax savings, although there are limits. The maximum credit can reach $2,100 if your family has two or more children.
If your family has an adjusted gross income (AGI) under $15,000, the credit may be 35 percent of qualifying expenses of $3,000 for the first child and $6,000 for two or more children. If your AGI exceeds $15,000, the credit percentage is incrementally phased down by salary range until it hits 20 percent for those earning more than $43,000. For example, if your AGI is $58,000, the maximum credit would be $1,200.
You may qualify for the child care credit if your household contains someone in the following categories:
o A spouse who is mentally or physically handicapped.
o A child or children under 13 years of age.
o An individual of any age who is physically or mentally handicapped.
The maximum eligible expense is $3,000 for one "child," $6,000 for two or more. The credit is 20 to 35 percent of that.
What are "Qualified" Expenses?
Some child care expenses that qualify may be the use of a babysitter, housekeeper, or personal attendant to care for the "child." That may qualify even if you are employing a relative for one of those positions. Remember, you must record the Social Security number of the person providing the care for which you are paying, in order to claim the credit.
For more in-depth information on what credit your family situation may entitle you to, contact a tax professional.