Taxpayers with children may experience additional tax cut on 2018 returns
APPLETON, Wis. - Jan. 25, 2019 - PRLog -- When trying to cut costs with a child, parents can get creative. One thing they often cannot cut, however, are childcare costs. Luckily, there is a tax credit for child and dependent care expenses offered on individual tax returns. The credit can be up to 35 percent of qualifying child care expenses, limited to $3,000 for one qualifying person or $6,000 for two or more qualifying persons, depending on adjusted gross income.
To receive the credit for child and dependent care expenses, the person receiving the care must be a qualifying person — either your dependent child under the age of 13 or individuals who are physically or mentally incapable of self-care. You must also be the custodial guardian for the qualifying person and they must live with you most of the year, even if you do not claim them as a dependent.
Only care provided while you (and your spouse) are either working or looking for work qualifies. If you are married, you must file a joint return in order to file for the credit. In order to claim the credit, you (and your spouse) must have earned income from wages, salaries, tips or net earnings from self-employment. One spouse can be exempt from having earned income if he or she was a full-time student or was physically or mentally unable to care for themselves.
Another requirement to receive the credit is a qualified caregiver must provide the dependent care. Spouses, dependents and children under 19 are not qualified caregivers. At the end of the year, most caregivers will provide a statement with their federal employer ID number (EIN) or Social Security number (SSN), full name, address and amount paid. All of this information is necessary for your tax return. If you do not receive a statement at the end of the year with this information, you should request this information prior to bringing your information to your tax preparer.
If your employer provides a dependent care benefit, the benefit amount reduces the amount of credit available on your tax return. If you pay someone to come to your home and provide care, you may be considered a household employer, in which case additional forms need to be included with your tax return.
This article contains general tax information for taxpayers. Each tax situation may be different, so do not rely upon this information as your sole source of authority. The National Association of Tax Professionals (NATP) advises working with a trusted expert who keeps current on tax law changes and is an NATP member. To learn more about NATP or to find a registered tax professional near you, visit www.natptax.com.
NATP is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of more than 22,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers. The NATP headquarters is located in Appleton, WI. To learn more, visit www.natptax.com.