5 Things to Know about the Child Care Tax Credit?

Taking advantage of the child care tax credit helps minimize the total amount of your annual tax obligations. If you hire and pay someone to attend to the needs of your child while you work, you may be eligible for this tax break. The credit could give you up to a maximum of $2,100 of your child care expenses. Here are 5 facts that you need to know more about the child care tax credit:

  • For a child to qualify for the credit, he or she must be under 13 years of age. Moreover, the dependent must have lived with the parent/s in a minimum of 6 months of the tax calendar year.
  • To claim the credit, the person filing the tax must passed the child care tax credit tests. These are earned income test, joint return test, provider identification test, and work-related expense test.
  • Providers who are have been looking for work, but fail to find a job and have no earned income during the tax year is not qualified to receive the credit.
  • A taxpayer who employs a child care provider in his household may be required to pay Medicare and Social Security taxes, federal unemployment tax and federal income withholding tax.
  • The dollar limit of the credit may be reduced if the provider receives dependent care benefits from his employer.