Here is today's Tax Credit Check. Taking advantage of tax credits can save you money at tax time. In some cases, tax credits could even increase the amount of your refund.
There are two types of tax credits: refundable tax credits and nonrefundable tax credits. A refundable tax credit allows you to lower your taxes and if your credit is more than what you owe, you could receive a refund of the difference. A nonrefundable tax credit lowers the amount of taxes you owe, but not below zero. If a nonrefundable credit is more than the taxes you owe, you will not receive a refund of the difference.
The Child and Dependent Care Credit is a nonrefundable credit that can ease the taxes of working families. You may be able to claim the child and dependent care credit for expenses paid to allow you (and your spouse if you are married) to work or look for work.
Let's check five things to remember about the Child and Dependent Care Credit:
Check One: Eligible work-related expenses for the care of a qualifying child under 13 years old or for your spouse or dependent who is not able to care for him or herself.
Check Two: Credit can be up to 35 percent of your qualifying expenses depending on your income.
Check Three: For 2011 and 2012, you may include up to $3,000 of the expenses paid in the year for one qualifying individual or $6,000 for two or more.
Check Four: Qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that you exclude from gross income.
Check Five: To claim a child care credit, you must provide the IRS with the name, address, and taxpayer identification number of the child care provider on Form 2441, Child and Dependent Care Expenses, unless the provider is a tax-exempt organization (such as a church or school).
Another perk of this credit is that before and after school care expenses along with summer camp may qualify as work-related expenses for the child and dependent care credit.
For more information on how to qualify for this credit, refer to Publication 503, Child and Dependent Care Expenses.