Expenses for the care of children under age 13 and qualifying relatives must be incurred so you can work or look for employment, and you must report the provider’s tax ID number. Use Form 2441 to claim the credit. If taking the credit for costs to help care for a relative who is not a qualifying child, such as an aging parent or grandparent, that person needs to have lived with you for more than six months during the year and be unable to care for him- or herself. The credit is worth 20% to 35% of up to $3,000 in eligible child care expenses, depending on your income…$6,000 if you have two or more children needing care.
Don’t miss out on this tax break if you use a flex plan for child care costs: You can still claim the dependent care credit to the extent your expenses are more than the amount you pay through your workplace flexible spending account. The maximum dependent care costs that can be funded through an FSA are $5,000, but the credit taken on your return applies to as much as $6,000 of eligible expenses for filers with two or more kids. You’d run the first $5,000 of dependent care costs through the FSA, and the next $1,000 would be eligible for the credit on Form 2441.
Remember that summer day camp costs qualify for the dependent care credit. If you send your child to any special day camps this summer, such as those for sports, computers, math or theater, don’t forget about the tax break. The same goes for camps that your child is attending this summer to help improve reading or study skills. But expenses for summer school, tutoring programs and overnight camps don’t qualify. Before- and after-school care programs are also eligible for the credit.