The CDCTC is often confused with the CTC, but it’s not the same credit. You can take this credit if you had a minimum earned income amount for this tax year and you’re paying for the care costs of a dependent.
You can claim the child and dependent care credit if you’re a godparent, caring for elderly parents, or paying for the care of disabled relatives.
To qualify, dependents must be:
- 12 or under, in the case of children, when the tax year ends.
- An adult family member or spouse who isn’t able to cover their own care needs due to physical or mental disabilities. These dependents must have a gross income of $4,150 or less.
The CDCTC can be used to claim back qualified care expenses up to 35% of the total cost. The percentage you can deduct, again, depends on how much you earned during the tax year.
The credit can be applied to care expenses of $3,000 for a single dependent or $6,000 for more dependents. The biggest credit amount you can claim is $1,050 for a single dependent and $2,100 if you have more than one dependent. You can estimate your credit with the child dependent care calculator.
This is not a refundable tax credit and must be used for expenses involving care while you work (or are looking for work) or household services.
The CDCTC doesn’t include child support.
Use Form 2441 if you’re eligible to claim this tax credit.
What about State Child Tax Credits?
Certain states also have the above credits at the state level. They usually partially match or fully match the Federal versions of these tax credits.
Depending on the state, they may also be refundable.
You should check out whether your state offers these credits and how much they’re worth.
What You Should Take from this Guide
The IRS provides help to parents and guardians when they want to raise a family. They also provide support to people who are caring for other dependents. Parents should be claiming the CTC because most Americans are now eligible for the full credit. For those with low tax bills, it’s possible to get a tax refund out of it.
To make sure you’re claiming these tax credits correctly, you should consult a tax professional to help you out. That way everything can be taken into account and you can avoid overpaying the Federal government or leaving money on the table.
Tips for Saving Money When You File Your Taxes this Year
- Do everything you can to reduce your tax bill by claiming credits and deductions. Try to take everything you’re eligible for. Many taxpayers make the mistake of failing to apply for every credit and deduction they’re eligible for. This is why you should consider H&R Block for your taxes.
- Look into savings accounts like the 401(k) and the health savings account (HSA). These allow you to stow away pre-tax money, so you can start saving before you even begin paying taxes. Making these contributions will also lower your overall taxable income and may put you in a different tax bracket. The changes to the tax brackets make it more likely that you’ll find yourself in a lower bracket than in previous years.