Tax Tips: Child and dependent care credit
In order to claim the credit, the taxpayer must report the social security number of the person providing the child care, or the federal identification number of the daycare center providing the care. If one spouse is not working, no credit is allowed. (One exception to this may occur if the spouse is a full-time student.) If both spouses are working, the eligible child care costs cannot exceed the wages of the lower earning spouse.
The amount of the credit is usually 25% to 35% of the qualifying child care expenses, but the rate changes depending on the income of the taxpayer. One note: Tuition at a preschool or private school is not considered a qualifying daycare expense.
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.