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Home / Tips and Tricks / You can get back up to $ 16,000 in childcare costs when you file your taxes for 2021. Here’s how

You can get back up to $ 16,000 in childcare costs when you file your taxes for 2021. Here’s how



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You can get a childcare discount for expenses.

Sarah Tew / CNET

Working parents have faced many challenges this year. Between their professional jobs, carrying the burden of distance learning and providing endless amounts of childcare, many parents have been pushed to the limit. The US Rescue Plan Act adopted in March has tried to alleviate some of those demands – including the use of a new and temporarily expanded childcare tax credit.

These credits are not the same as the new child discount coming in July. Instead, you can claim any eligible expenses related to childcare, such as a daycare or home care provider that pays you to look after your child while you work. You can declare up to 50% of your expenses, depending on your income (we explain below).

We will tell you everything you need to know about how childcare tax credits work. Use our calculator for child discount to see how much you are getting and how to spend your money. Also make sure that you qualify for the payments, like your family members.

How much money can you claim per child for the childcare credits?

According to Garrett Watson, senior policy analyst at The Tax Foundation, you can claim up to $ 8,000 for one child or up to $ 16,000 for multiple dependents this year under the American Rescue Plan Act.

Normally, parents can claim up to $ 3,000 for one child or up to $ 6,000 for two or more children.

Is there an income limit to qualify for the credits?

Yes, from a household adjusted gross income should be less than $ 125,000, Watson said. If your income is higher than that, your tax credit will lapse at 50%. For example, instead of $ 8,000, you now get $ 4,000. The credit rate falls back to 20% for people with an AGI of $ 183,000, and stays 20% until income exceeds $ 400,000.

Credit interest eventually expires in full for those who earn $ 438,000 or more.

With the original childcare tax credits, credit rates would decrease to 35% if income exceeded $ 125,000 and 25% if income exceeded $ 183,000.






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What are the qualification rules for dependents?

They are quite broad. To be eligible, according to the IRS, dependents must:

  • Be younger than 13 years old, or
  • Unable to take care of themselves (if 13 or older). For example, if you have a spouse or an elderly dependent who is disabled and unable to take care of themselves – and have lived with you for more than half the year – you can claim the tax credits for them, or
  • Being physically or mentally incapable of self-care – even if their income was $ 4,300 or more – and
  • Get a tax identification number, such as a social security number.

Are there rules for who takes care of your children?

According to Elaine Maag, principal investigator at the Municipal Institute, the IRS has relatively lax rules about health care providers. You can pay a family member, hire a housekeeper, or recruit a nanny. You can also declare costs for daycare, before and after school care, day camp, and transportation to and from caregivers, Watson said.

However, parents paying their babysitters in cash “under the table” should know that it is risky to claim the childcare tax credit as the income may not be claimed or documented by the provider.

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If you pay someone to take care of your children, you can declare those costs.

Sarah Tew / CNET

Can more than one parent claim the tax credit? What about children of divorced or divorced parents?

No. The rules are similar to those for the child discount: only the parent who has parental authority can claim the childcare discount.

If you’re married, both parents must work – or receive unemployment benefits – to be eligible for the credit, Maag said. And if you are in school, you can still earn credits.

How to claim the tax credit for children and dependent care

You won’t actually claim the deduction until you file your 2021 tax next year (in 2022). For now, keep a detailed record of all childcare expenses, including the kind of expenses you paid and their tax number. You then complete form 2441 (PDF) and enclose it with your tax return form 1040.

For more ways to get money this year, see here how to save up to $ 50,000 in 2021 with one-time COVID credits and benefits. Here is also how you spend the money from your child discount and how to unsubscribe from the monthly child discount.






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