Tax Guide |
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If your employer does not offer any type of dependent care assistance, the tax credit for child and dependent care may be your only chance to recover some tax benefits for these dependent care expenses. It's available in varying degrees to anyone who has children under the age of 13, who supports a disabled relative, or who has a disabled spouse.
If your employer does provide dependent care assistance, the tax credit may still be a better deal, particularly if you are in the 15 percent marginal tax bracket. If you meet all the qualifications described in the following sections, you can reduce your tax bill by up to $1,050 if you have one qualifying dependent, or by up to $2,100 if you have two or more.
If your employer provides only a small amount of dependent care assistance (under $3,000 for one child or under $6,000 for more than one), but you have expenses that exceed what your employer paid, you may be able to take advantage of your employer's plan and claim the tax credit for your excess expenses.
How much is the credit worth? Basically, the credit works like this: You get a tax credit of between 20 and 35 percent of your qualifying child care expenses, but you can only count expenses of up to $3,000 for one dependent, or up to $6,000 for two or more dependents. (The credit does not have to be equally divided between qualifying dependents.)
Whether you can claim 20 percent, 35 percent, or somewhere in between depends on your adjusted gross income (that is, your net taxable income before subtracting your exemptions or deductions).
The following table shows the applicable percentages. The law states that these figures are not to be adjusted for inflation.
| Adjusted Gross Income | Percentage of Expenses | Maximum Credits | ||
| Over | But Not Over | One Person | More Than One | |
| $0 | $15,000 | 35% | $1,050 | $2,100 |
| $15,000 | $17,000 | 34% | $1,020 | $2,040 |
| $17,000 | $19,000 | 33% | $990 | $1,980 |
| $19,000 | $21,000 | 32% | $960 | $1,920 |
| $21,000 | $23,000 | 31% | $930 | $1,860 |
| $23,000 | $25,000 | 30% | $900 | $1,800 |
| $25,000 | $27,000 | 29% | $870 | $1,740 |
| $27,000 | $29,000 | 28% | $840 | $1,680 |
| $29,000 | $31,000 | 27% | $810 | $1,620 |
| $31,000 | $33,000 | 26% | $780 | $1,560 |
| $33,000 | $35,000 | 25% | $750 | $1,500 |
| $35,000 | $37,000 | 24% | $720 | $1,440 |
| $37,000 | $39,000 | 23% | $690 | $1,380 |
| $39,000 | $41,000 | 22% | $660 | $1,320 |
| $41,000 | $43,000 | 21% | $630 | $1,260 |
| $43,000 | no limit | 20% | $600 | $1,200 |
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