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The Child and Dependent Care Credit is worth as much as 35% of your qualified expenses, up to $3,000, (for one qualifying person), and $6,000 (for two or more qualifying persons). Your percentage depends on your AGI, with the higher percentages applying to lower incomes and vice-versa.
EIC or Dependent Care Credit Only @Ocala @Kailef Yes, there is a little known provision in the rules. If the child meets all the qualifying child (QC) rules, except the self support test, he is still a qualifying child for EIC, even though he is not a QC for being a dependent.
For example we paid $10,800 for childcare, we have 2 children. We put $5000 in an FSA account, the program shows that we had $5800 in out of pocket expenses. ($10800 - $5000). But when you get to the screen it is showing our total eligible Dependent care credit is $6000, dependent care benefit on W2 is -5000 to our total eligible credit is $1000.
Fairness doesn't usually enter into laws made by Congress. I suppose they had a good reason to deny the dependent care credit to MFS, but you would have to ask them (probably back in 1986). You can use a tax-free dependent care FSA to pay for care expenses even when married filing separately.
Yes. But, if you claim the dependent care credit, she will have to claim the money as income and pay social security and medicare tax (15.3%), as well as income tax. If she babysat in your home, instead of hers, she is classified as a household employee. Grandparents (parent of the taxpayer) are exempt from the "Nanny tax".
CHILD AND DEPENDENT CARE CREDIT . You will not get the childcare credit until (unless) you enter income earned from working. The credit does not work unless you enter your income first. If you are filing a joint return you must show income for both spouses, or show that one or both of you was a student or disabled.
You are correct.When you are self employed and report this income on an IRS Schedule C, the Net Income (i.e. the income remaining after you've deducted your expenses) from this business qualifies as earned income for the Child and Dependent Care Credit.
The Dependent Care Credit is limited to $3000 in expenses per child. If you have an FSA, your limit is actually raised to $5000 for one or more children. You could only get an extra credit on your tax return if your FSA was under $3000. If you had 2 children, and your FSA was $5000, you can get a credit for that extra $1000.
If you entered child care expenses, remember that only $3,000 of expenses qualifies for the Dependent Care Credit for each child. If you had an employer plan that covered this amount, you would not qualify for a credit, even though you paid more yourself. Here's detailed info on the Child Care Credit.
The credit is correct. The FSA benefit is subtracted from the overall allowable total. If you provided care for 2 or more children, the maximum eligible cost is $6000.