This $8,000 tax credit can help cover childcare costs

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There is no doubt that child care has become much more expensive in today’s high inflation environment.

That’s why financial experts are trying to spread the word about an important tax credit that many Americans might not be aware of. Green-lit via President Joe Biden’s US bailout package last spring, it’s known as the Child and Dependent Care Tax Credit.

If a parent meets all of the eligibility requirements, they could be the recipient of a whopping $8,000. The maximum amount would be 50% of their total child care expenses, which can reach $16,000 for two or more children. Also, it is important to note that the credit is fully refundable, meaning that even if an individual is not subject to tax, they could still receive the credit as a refund.

“More tax breaks”

“Along with other tax changes, [this credit] has been expanded in several ways. The result is that many households will get more tax relief, and the credit could reach more people than before,” CNBC writes.

“In other words, it’s worth checking to see if you’re eligible even if you haven’t been able to get the tax relief in the past,” the article says, citing advice from Henry Grzes, manager principal of tax practice and ethics at the American Institute of CPAs.

It is important to note that people whose adjusted gross income is greater than $438,000 are not eligible for these credits, even if they were able to claim them before. The amount of the credit also begins to disappear when a taxpayer’s income reaches $125,000.

This is a “tax credit that can help you pay for child care and other eligible dependents (eligible persons). The credit is calculated based on your income and a percentage of the expenses you incur in caring for eligible people to allow you to go to work, look for work, or attend school,” writes the Internal Revenue Service on its website.

To qualify for the credits, the IRS specifies that you have “a child under age 13 who is dependent on you” and “a spouse or dependent of any age who cannot care for themselves. and who lives with you for more than six months of the year.

Get credits

When filing taxes this year, parents should make sure they have any receipts, forms, or documents showing the amount spent directly on child care. They must also complete Form 2441 and attach it to their tax return before sending it to the IRS.

“You must identify all people or organizations that cared for your child, dependent, or spouse,” the IRS says. “To identify the care provider, you must provide the provider’s name, address, and tax identification number (TIN).”

Ethen Kim Lieser is a Washington State-based science and technology editor who has held positions at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow him or contact him on LinkedIn.

Picture: Reuters.

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