For your 2021 tax return, the cap on expenses eligible for the child and dependent care tax credit is $8,000 for one child (up from $3,000) or $16,000 (up from $6,000) for two or more.
Depending on your income, you may be able to write off 50% of those expenses.
Last year’s child-care expenses may be worth more at tax time than you realize. The child and dependent care tax credit, as it’s called, was expanded in several ways for 2021 alongside other tax changes. This means many families will get a bigger tax break and the credit could reach a larger swath of households than it had before.
The average national cost for an infant in full-time child care is $9,991 annually, according to ValuePenguin research. Generally, the cost of care goes down as the child gets older, although it can still easily run into thousands of dollars per year depending on where you live and the specific type of care.
The child and dependent care tax credit — which is different from the more familiar child tax credit — gives parents some help covering the cost of care for children under age 13 or adult dependents. The expanded version, which was enacted as part of the American Rescue Plan Act last March, is for 2021 only and reverts to the previous rules this year. The general qualifications didn’t change, however, the credit is only available for dependent care provided so that you could go to work or look for work (or, perhaps, attend school). Generally speaking, you (and your spouse, for joint tax returns) must have earned income during the year to claim the credit.
Call your local tax experts at Meadville Tax Service to answer your questions at 814-333-2488 or email us at info@meadvilletaxservice.com
