Child AND Dependent Care Tax Credit

Here at Accountability, we want to ensure that you get all the money you deserve back into your pockets come tax season. That’s why this month, we’re breaking down the Child and Dependent Care Tax Credit, and you’ll be thrilled to find out that this year you may be entitled to more money than ever before. So if you have children or an adult-dependent receiving care, keep reading to see how much money you will qualify for!

You are eligible to claim this credit if you, or your spouse, if filing jointly, pay someone to care for one or more qualifying persons in order for you to work or look for work, and your income level is within the income limits set for the credit. Remember, if you are married, you must file a joint return to claim the credit. However, if you are legally separated or living apart from your spouse, you may be able to file a separate return and still claim the credit.

Recent legislation expanded the refund to all families with incomes up to $125,000 to save up to one-half of their childcare costs, getting up to $4,000 back for one child and up to $8,000 for two or more children when you file your 2021 tax return. Families making between $125,000 and $400,000 can still receive partial credit at least as generous as the credit you received in 2020. And for the very first time, the Child and Dependent Tax Credit will be fully refundable! This means that even if your credit exceeds the amount of federal income tax you owe, you can still claim the full amount of your credit, and the amount of the credit in excess of your tax liability can be refunded to you. So this year is the year to get some significant credits, even if in previous years you “made too much” to qualify!

When filing, be sure to provide the amount you’ve paid, along with the name, address, and tax ID number with your paperwork. Sadly, you won’t receive this credit if the person you are paying doesn’t provide their tax ID number. So, if you are paying someone to care for your children or adult dependent under the table, you won’t be getting this credit.

We hope the adjustment to the legislation centered on this tax credit means a great deal of savings for you and your family!

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