Talking Taxes: How the Childcare Credit Works
Do you send your kids to daycare? Have an in-home sitter?
As long as you work – and pay the nanny/manny/babysitter on the books – families with two kids can claim up to $6,000 in tax credits this year. So how does it work?
- Your kids have to be under age thirteen. You may be worried about leaving the fourteen-year-old alone in a house with a well-stocked liquor cabinet, but the IRS doesn’t care.
- You must be making an income. Ya know, that’s why they call it a credit on your INCOME taxes.
- If your employer gives you money toward childcare, that must be deducted from the amount you’re claiming. If your employer is that type, please give me his number. I want to work there.
- You can’t write off what you pay to one of your other kids to watch their siblings (sigh) or what you pay your spouse to watch your kids. If you’re paying your spouse to watch their own child, you might want to find a new spouse (sorry, just saying).
- If you’re paying someone to come to your house rather than paying someone who has their own daycare or a sitter who has her own business, you may owe the government more because you’re an official employer. This gets a lot of big important big wigs in trouble just as they’re about to be confirmed as something even bigger and more important, so check this one closely. It might do to even hire an accountant. Just don’t pick this guy.
- The kid being babysat must have lived with you for at least half of 2008. If he hasn’t, why did you need a babysitter?
- Your filing status must be single, married filing jointly, head of household or qualifying widow(er) with a dependent child. In other words? You have to file . . . AND have a kid. Imagine that.
- If you didn’t pay out $3,000 for childcare for your one child, you don’t get a $3,000 credit. If you didn’t pay out $6,000 for two kids or more, you don’t get a $6,000 credit. Those are simply the top end (try telling that to your daycare provider).
There are more tips over at the IRS Website, but these are the biggies. Are you going to be filing for a tax credit for childcare this year? Is it worth it?
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With the cost of full time childcare in the Chicago area, I’m going to have to send my newborn to work to pay for her own care, regardless of the Childcare Credit. Or something like that.
Regarding the question, does preschool count?
Pretty sure it does, if you can say that you send the kid to preschool so you can work. Or at least tell the IRS that.
The bit about writing off a percentage of what you paid up to $6,000 for two or more kids is pretty important. If it’s one kid, you get $3,000.
Here’s how it works in real life. I have one kid. I paid $13K in childcare last year. I make little enough to take the full credit, so I got 20% of $3K. I paid $13K and I got a $300 credit.
Doesn’t sound so great anymore, does it? That barely covers one week of daycare for me.
Beans Mom – I just sent in that question to my accountant! My daughter attends pre-school twice a week, and I work during that time. I think if it doesn’t count as daycare it will count as education expenses, but I’ll let you know what my accountant says as soon as she gets back to me.
Does anyone know if preschool counts? My husband will be doing freelance work at home while our daughter goes to preschool.
That’s OK Nell – I know I didn’t hit it all, I can’t navigate the whole tax code – that’s why I referred parents to the IRS site for more!
Thanks for the extra info.
I think Twyla’s right. My kids were born in November, and we got a full year deduction. It kind of rocked.
The maximum you can take into account is $3000 or $6000, yes, but the credit itself is only 20% of what you paid. A birth, sometime in the tax year, is treated as a full year, but at the age limit, the amount you can take into account is the amount paid up to the 14th birthday.
Also, if the taxpayer works but the spouse does not, there are restrictions on the use of this credit. It can also be applied if one spouse works and the child care is so that the other spouse can take qualifying education classes.
It might be worthwhile to point out that this credit is called the Child and Dependent Care credit, and it does apply in such circumstances as when a spouse is disabled, as an example, and that spouse requires full time supervision. If your parent is a qualifying dependent, perhaps with alzheimers, and you pay for daytime care so that you can work, those costs can get you the credit.
Sorry I got carried away.
I thought that if your kid was born anytime in the tax year it counts as the full year. At least that is how it works with claiming a newborn as a deduction. As long as baby makes his way out by Dec. 31, he is a full year deduction. I am assuming that would also apply to this credit.
Yes, I took it and it helped tremendously. Now I am thankful that my mom charges us to watch our kids. It is a win-win situation.
“If he hasn’t, why did you need a babysitter?” – Maybe if you had your kid July 1, 2008?