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Taxation: Child &
Dependent Care Credit
A qualifying child can be claimed as a
dependent by only one taxpayer.
Having a qualifying child may enable you
to claim several tax benefits, such as
Head of Household filing status, the
exemption for a dependent, the Child Tax
Credit, the Child and Dependent Care
Credit, and the Earned Income Credit.
Who is a qualifying child?
A dependent
must be your qualifying child or qualifying
relative.
A child is considered to be a
qualifying child if they meet all of the
following conditions:
- Relationship: The child must be your child
or stepchild (whether by blood or adoption),
foster child, sibling or stepsibling, or
a descendant of one of these.
- Residence: The child must live with you
for more than half the tax year. Some exceptions
apply for children of divorced or separated
parents, kidnapped children, temporary absences,
and for children who were born or died during
the year.
- Age: The child must be younger
than 19 at the end of the tax year, or
younger than 24 if a full-time student
for at least 5 months of the year.
Children who are permanently and totally
disabled during
the year qualify.
- Support: The child can't provide more than
half of his own support for the year.
- Exception: If you are not legally
required to file a tax return, then you
may not claim the child tax credit
Top things to know
about taking the child and dependant
care credit:
- You must have
paid for care for one or more
qualifying persons. A qualifying
person is your dependant child under
age 13. or, your spouse and certain
other individuals who are mentally
or physically unable to care for
themselves.
- The care must be
provided so that you and your spouse
could work or actively be looking
for work as per qualifying
restrictions.
- Your income is
considered to be wages, salaries,
tips, or income from
self-employment. Income from
pensions, social security, worker's
compensation, interest and
dividends, unemployment benefits,
child support and alimony,
nontaxable workfare payments.
You must identify the
care provider on your tax return. The
care provider cannot be your spouse,
someone you can claim as your dependant
on your tax return, or your child under
age 19 even if the child is not your
dependant.
The credit can be for
up to 35% of your qualifying expenses,
depending on your income. The credit for
those who have an adjusted gross income
of $15,000 or less can take the full 35%
The qualifying
expenses must be reduced by the amount
of any dependent care benefits provided
by your employer that you exclude from
your income.
What is a qualifying relative?
A person is a qualifying relative if that
person is not a qualifying child
(See Publication 501) and meets
the following requirements:
Gross income: has gross income
of less than $3,400 for the year.
Support test: You must provide more
than half that the support for the
year.
Member of household or relationship test: The person must have either lived with
you for the entire year as a member of your
household or be related to you. Certain
relatives are not required to live with
you for the entire year.
Many exceptions and special rules apply.
See IRS Publication 501.
Tiebreaker Tests
Child Tax Credit, Head of Household
status, the Child Care Credit and
Exclusion for Employer-provided Child
Care Benefits, and the Earned Income
Credit.
If more than
one individual claims any of these benefits
with respect to the child, the IRS will
use the following tests to determine who
gets to claim the child as a dependent
as well as the other tax benefits:
- If only one is the child's
parent, the parent claims the child.
- If the 2 people are the child's parents
and they don't file a joint return, the
individual with whom the child lived longer
during the year claims the child. If the
child lived with the parents the same amount
of time, the child is claimed by the parent
with the higher adjusted gross income.
- If none of the individuals are the child's
parent, the individual with the highest
adjusted gross income claims the child.
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