How to Claim Day-care Expenses on your Taxes

Young kids at day care.
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The Internal Revenue Service won't pay your day-care bill for you, but it will give you a break if the purpose of signing your children up for that service was to allow you and your spouse to work or look for work. A portion of qualifying expenses can be written off as part of the Child and Dependent Care Credit.

Work-related Only

For the day-care expenses to be eligible for deduction, it has to be necessary for you to work or find employment. If your spouse doesn't work and isn't a full-time student, you can't claim the deduction. Nor can you claim a day-care expense that isn't related to work. For example, if your day care offers a special session for a "Parents' Night Out" promotion outside of your regular business hours, those expenses could not be deducted. To claim the deduction, you have to file as single, married filing jointly, head of household or a qualifying widow or widower; married taxpayers who file separate returns generally can't claim it.

$6,000 Maximum

There's a limit to the IRS' largesse. The maximum expense you can count is $3,000 for one child or $6,000 for two or more. If you pay more than that, the extra amount can't be considered. However, if you have multiple children in day care, more than $3,000 in expenses for one child can be considered as long as the maximum doesn't exceed $6,000. If you have a 4-year-old in day care with $5,500 in day-care expenses and a 12-year-old who just goes to day care after school on occasion and generates just $1,000 in expenses, you can still use a total of $6,000 when performing the calculation.

Pick Your Percentage

Only a portion of your qualified expenses is taken off your taxes. You can deduct 35 percent of day-care expenses if you make $15,000 or less in adjusted gross income -- a percentage that drops as your income rises. If your adjusted gross income is $43,000 or greater, only 20 percent of qualifying expenses can be deducted. Moreover, this amount can't be greater than your overall tax burden. If you qualify for a $1,000 credit but have a tax bill of $500, you're limited to a $500 credit.

Form 2441

To claim the credit for day-care expenses, you'll have to complete Form 2441. This documents your day-care provider's name, address and tax identification number. You'll need to write down the name and Social Security number of each qualifying child and the qualifying expenses associated with each child. Use the chart the IRS provides to deduct the correct percentage of the credit based on your AGI. You'll put the amount of the credit on line 49 of your Form 1040, line 31 of your Form 1040A or line 47 of your Form 1040NR.

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