Can I claim the Child and Dependent Care Credit?
If you paid someone to care for your dependent under age 13 or your disabled dependent or spouse so that you could work or look for work, you may be able claim the credit for child and dependent care expenses. For specific information on how to qualify for this credit refer to Tax Topic 602, Child and Dependent Care Credit, or Publication 503, Child and Dependent Care Expenses.
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My divorce decree states that my ex-husband can claim our daughter as an exemption on alternate years. I am the custodial parent and pay child care expenses. Can I claim child care expenses on the years he takes the exemption?
The Child and Dependent Care Credit can only be claimed by the custodial parent. This is true even if you cannot claim the child's exemption. Refer to Publication 503, Child and Dependent Care Expenses, for a complete discussion.
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My babysitter refused to provide me with her social security number. Can I still claim what I paid for child care on my taxes while I worked? If so, how?
Yes, assuming that you already meet the other requirements to claim the child care credit, but are missing the required ID number of the provider, you can still claim the credit by demonstrating "due diligence" in attempting to secure the needed information.
When the care provider refuses to give the identifying information, the taxpayer can still claim the credit and is instructed to provide whatever information is available about the provider (such as name and address) on the form used to claim the credit (Form 2441, Child and Dependent Care Expenses, or Form 1040A, SCHEDULE 2, Child and Dependent Care Expenses for Form 1040A Filers). The taxpayer should write "see page 2" in the columns calling for the missing information. He/she would write at the bottom of page 2 that the provider refused to give the requested information. This statement will show that the taxpayer used due diligence in trying to secure and furnish the necessary information.
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As a child care center, are we required to give out tax statements to any of our parents who request one? Can we refuse to give a tax statement to someone who has a past due balance with us?
As a care provider, you are required to give your correct name, address, and Taxpayer Identification Number (TIN) to customers who paid for child care services during the year. A valid TIN can be the Employer Identification Number (EIN) of the business or the social security number of a sole proprietor. Form W-10, Dependent Care Provider's Identification and Certification, or a similar statement may be used for such purposes.
A care provider who does not give the customer a correct TIN is subject to a penalty of $50 for each failure unless the failure is due to reasonable cause and not willful neglect. The failure of a customer to full pay a bill would not normally constitute reasonable cause. The penalty does not apply to qualified tax exempt care providers.
When the care provider refuses to give the identifying information, the taxpayer can still claim the credit and is instructed to provide whatever information is available about the provider (such as name and address) on the form used to claim the credit (Form 2441, Child and Dependent Care Expenses, or Form 1040A, SCHEDULE 2, Child and Dependent Care Expenses for Form 1040A Filers). The taxpayer should write "see page 2" in the columns calling for the missing information. He/she would write at the bottom of page 2 that the provider refused to give the requested information. This statement will show that the taxpayer used due diligence in trying to secure and furnish the necessary information.
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I am thinking of having an au pair take care of my child. There is a $4,000 fee up front and I will be paying $150 a week to the au pair. What, if any, of this is deductible?
The up front fee is not deductible. The $150 per week as well as other work related expenses may qualify as a child and dependent care expense. Please refer to Publication 503, Child and Dependent Care Expenses for a full discussion.
If your au pair works in your home, you may also be responsible for employment taxes. Refer to Publication 926, Household Employers Tax Guide, for more information.
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If I send my child who was under the age of 13 to day camps instead of a child care facility for the summer, are these deductible expenses?
The cost of day camp may qualify as a child care expense. The cost of overnight camp would not.
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I am thinking of having a family member baby-sit for my child full time in their own home while I work. Are either of us responsible for taxes on the money I would pay? Can I deduct this money as my child care expense even though my family member is not a registered day care provider?
You may have deductible child care expenses if the family member is not your dependent and you meet all the tests to claim the Child and Dependent Care Credit. Your family member will be responsible for paying taxes on the money earned and will be considered to be self-employed.
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Can elderly day care payments be claimed as a deduction?
Elderly day care payments may qualify as Child and Dependent Care Expenses. In order to be a qualifying person, the person receiving the elderly day care must be either your spouse who was physically or mentally not able to care for himself or your dependent who was physically not able to care for himself and for whom you can claim an exemption (or could claim an exemption except the person had $2,800 or more of gross income in the year 2000). All of the other criteria for claiming the Child and Dependent Care Credit must also be met.
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My spouse and I both work and are eligible for the Child and Dependent Care Credit. May I include my 5 year old son's parochial school kindergarten tuition cost as a qualified expense in Form 2441, Child Care Expenses?
The expenses for kindergarten do not qualify for the dependent care credit because kindergarten is primarily educational in nature. However, you can count the part of the expenses of sending your child to school that is for your child's care if it can be separated from the expenses of education.
If your child is in the first grade or higher, or if the cost of schooling can be separated, you must divide the total cost between the cost of care and the cost of schooling. You can count only the cost of care in figuring your credit.
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I paid into a dependent care benefits plan and the amount is shown in Box 10 of the my Form W-2. However, the cost paid to the child care provider was more. Can the additional expense not paid into the dependent care benefits plan and not shown in Box 10 of the W-2 be claimed on Form 2441?
That depends on the amount you elected to have contributed to the flexible spending arrangement. The exclusion from income for employer-provided benefits can be as high as $5,000, while the credit for dependent care expenses is based on annual dollar limits of $2,400 for one person and $4,800 for two or more persons. You must reduce those dollar limits by the amount of excludible dependent care benefits. If you had expenses that you paid yourself and the employer provided benefits were less than the applicable dollar limit, you can also claim the credit. Complete Part III of either Form 2441, Child and Dependent Care Expenses, or Form 1040A, SCHEDULE 2, Child and Dependent Care Expenses for Form 1040A Filers, to determine the excluded benefits and whether you can claim the credit.
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If my employer did not put the amount I paid into a flexible spending account for dependent care in box 10 on my Form W-2, can I claim the Child Care and Dependent Tax Credit?
If the omission was simply a clerical oversight, you may not claim the child care tax credit. If the flexible spending account was an eligible plan under Internal Revenue Code Section 125, the amount of the salary reduction that was contributed to your account should appear in box 10 of your Form W-2. Request a corrected Form W-2 from your employer.
You may claim the child care tax credit if the contribution to your flexible spending account was less than your annual dollar limitation for eligible expenses ($2,400 for one person, or $4,800 for two or more persons). Even if you cannot claim the credit, you must complete Part III of either Form 2441, Child and Dependent Care Expenses, or Form 1040A, SCHEDULE 2, Child and Dependent Care Expenses for Form 1040A Filers, to exclude your employer provided benefits from your income. If the amount you paid into a flexible spending account reduced your wages in box 1 of Form W-2, it is considered an employer provided benefit.
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I was under the impression that a Dependent Care Benefit Plan would benefit me, not penalize me with an increase in taxes. How can my employer say they provided a benefit in the total amount of $3,000 in W-2, Block 10 when I had $3,000 in wages set aside for dependent care benefits?
The actual mechanism for this type of plan is an agreement to voluntarily reduce your salary in return for an employer-provided fringe benefit. These plans must be set up this way to avoid the constructive receipt of the forgone cash wages, which would make the benefit taxable to you. Therefore, the benefits are actually employer provided or funded.
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What is a Hope Credit?
It is a nonrefundable tax credit for a student's first 2 years of undergraduate education.
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Who can claim the Hope Credit?
You can claim a Hope Credit for an eligible student who is:
- Enrolled in one of the first two years of postsecondary education (generally freshman or sophomore years of college).
- Enrolled in a program that leads to a degree, certificate, or other recognized educational credential.
- Is taking at least one-half of the normal full-time workload for the course of study for at least one academic period beginning during the calendar year.
- Is free of any felony conviction for possessing or distributing a controlled substance (drugs).
An eligible student can be you, your spouse, or an eligible dependent
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What is the amount of the Hope Credit?
The maximum credit per student is $1,500 (100% of the first $1,000 of qualified tuition and related expenses, plus 50% of the next $1,000 of such expenses).
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I understand for the Hope Credit I must be in my first two years of college. Does that mean I can take the credit if I am ranked as a freshman or a sophomore even if I have been attending college for more than two years?
The Hope Credit is available for the first 2 tax years of your postsecondary education. If you have been attending college for more than 2 tax years, even though you are a freshman or sophomore, you do not qualify for the credit.
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Is tuition paid to a foreign university eligible for the Hope Credit?
Few, if any, postsecondary institutions located outside of the United States participate in a student aid program administered by the Department of Education. Therefore, tuition paid to a foreign university usually does not qualify for either of the education credits. The educational institution should be able to tell you if it is an eligible educational institution.
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I will be able to claim the Hope Credit. What do I need to save to claim this credit?
You should keep all your canceled checks that were used to pay for the qualifying expenses and any other documentation showing the amount of tuition and fees paid.
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I am currently attending school for a second bachelor's degree. I completed my original degree several years ago. Am I eligible for the Hope Credit because I am just entering my second year of this bachelor's degree program?
Since you have already completed your first two years of postsecondary education, the courses that you are now taking do not qualify for the Hope Credit. You may be eligible for the Lifetime Learning Credit.
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I have returned to college after several years. I attend a community college and have not received an associate's degree as of yet. Can I claim the Hope Credit for tuition I paid this year?
You can only claim the Hope Credit if this is one of the first two years of postsecondary schooling.
For example, if you attended classes for only 1 or 2 semesters, you would still be in your first two years of post secondary school. If you attended 5 or more semesters, you would not be considered in your first two years of post secondary school even if you have not attained your associate's degree.
If you don't qualify for the Hope Credit, you may quality for the Lifetime Learning Credit
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How do I complete Form 2441 if I have flexible dependent care benefits through my employer?
You must complete Part III of Form 2441, Child and Dependent Care Expenses, (or Form 1040A, SCHEDULE 2, Child and Dependent Care Expenses for Form 1040A Filers) to claim the exclusion of the benefits from income even if you cannot claim the credit. Enter your total employer-provided dependent care benefits on line 10 (this amount should appear in box 10 of your Form W-2) and your qualified expenses on line 13. The last five lines of Part III will determine whether you can also take the credit and what your dollar limit is on qualified expenses. Complete Part I, Persons or Organizations Who Provided the Care, also.
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I am self-employed, but did not have net a profit last year. Is it correct that we do not qualify for the Child Care Credit on our joint return even though my wife received dependent care benefits on her W-2 box 10?
Generally, yes. When you complete Part III of Form 2441, Child and Dependent Care Expenses, which you must do to claim excluded benefits, line 17 asks you to enter the smallest of:
- your dependent care benefits,
- your qualified expenses,
- your earned income, or
- your spouse's earned income.
If you had a loss from self-employment and no other earned income, your earned income would be $0, unless you can use one of the optional methods on Form 1040, SCHEDULE SE, Self-Employment Tax. That would mean that the amount in box 10 of your wife's Form W-2 would have to be included in income. (For more information on the optional methods of computing self-employment tax, refer to Publication 533, Self-Employment Tax, or Instructions for Form 1040, Schedule SE, Self-Employment Tax.) If you were a full-time student during any five calendar months during the year, you would have deemed earned income of $200 per month.
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Is a flexible spending account for dependent care a dependent care benefit?
Yes. If the flexible spending account is providing you with a dependent care benefit, then it should be reported in box 10 of your Form W-2. These accounts are funded through a salary reduction, so the contribution to the account is considered an employer contribution. When you receive a dependent care benefit from your employer, you must complete Part III of Form 2441, Child and Dependent Care Expenses, (or Form 1040A, SCHEDULE 2, Child and Dependent Care Expenses for Form 1040A Filers) to see if the benefits are fully excluded from income. You may be able to also claim a credit for child and dependent care expenses if the excluded benefits are less than the dollar limit on qualified expenses.
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My mother has recently moved into a nursing home. Her social security and other income does not cover all the expenses. My siblings and I must make up the difference. Can the portion I (we) pay be considered for dependent care and be deducted or credited?
If you or one of your siblings can claim your mother as a dependent on their tax return, then that sibling can also claim the medical expenses which the sibling paid on behalf of your mother. The medical expenses which the other siblings pay would not be deductible.
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