TAX season has officially begun and many parents can expect to receive the rest of their child’s tax credit along with their refund. However, there is another tax break available to families.
The child and dependent care credit has been expanded, with the maximum effective yield of the credit up to $8,000 for one child or $16,000 for two or more.
The expansion is due to The American Rescue Plan Act, however, it only happens once.
However, you must provide all receipts and other monetary proof to claim the tax relief when filing your income tax return.
In previous years, the maximum amount of credit you could claim for a child or dependent was $3,000 for one and $6,000 for two or more.
The credit has now more than doubled thanks to the one-time expansion, which also increases the maximum rate of return on childcare costs from 35 percent to 50 percent.
This means that for tax year 2021, you can get up to $4,000 back for one child and $8,000 for two or more.
The child and dependent care credit is non-refundable prior to the US Rescue Plan, which means it may reduce your tax bill to zero, but you won’t. receive a refund.
The credit is now fully refundable, which means you’ll get the money even if you don’t owe taxes.
WHAT COST FOR CHILD CARE CREDIT?
These charges are based on the child care provider, however, there is some time for costs such as transportation.
Any person or organization that provides care for your dependents will be eligible as long as you pay for them. Unpaid spouses or relatives will not be counted.
Child care provider rules have been relaxed by IRS but you may have better luck getting childcare credits on formal institutions like kindergartens and daycares.
If you pay your babysitter with cash “under the table” it can be a risky move to claim a babysitting credit as income may not be claimed or demonstrated.
HOW TO COMPLAIN THE CHILD CARE EXPENSES WHILE PAYING TAX?
You must have a detailed account of all your child care expenses, especially any revenue you receive from the daycare. or after-school programs.
You will also need your name, address and “taxpayer identification number”. [TIN} of the care provider on your return. Form W-10 can be used to request the information you need from your care provider.
The child and dependent care credit form is built into software such as TurboTax and H&R Block and will ask you if you have children under 13 and if you paid for child care during the year.
WHICH DEPENDENTS QUALIFY?
According to the IRS, the dependents must fit one of the following criteria. They must be under the age of 13 or unable to care for themselves if 13 or older.
The child over 13 must have lived with you for more than half of the year.
The child must also be physically or mentally incapable to care for themselves, even if their income was at $4,300 or more.
According to the IRS, only the custodial parent can claim the child care credit on their taxes.
The custodial parent is defined as the parent or guardian who has lived with the child the most number of nights in 2021.
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https://www.the-sun.com/money/4532345/child-dependent-care-credit-expanded-tax/ Childcare tax credit boosted to $16,000 – do you and your kids qualify?