This new credit for 2021 is potentially worth up to $8,000 in tax credits to taxpayers spending money on daycare, babysitting and other care giver services.
Here is the breakdown:
Taxpayers with one qualifying person can receive up to a 50% credit on expenses up to $8,000 ($4,000 max on the credit)
Taxpayers with two or more qualifying persons can receive up to a 50% credit on up to $16,000 ($8,000 max on the credit)
This credit is refundable meaning you can receive the full amount of this credit even if you don’t owe any taxes.
This credit starts to phase out at $125,000 in income and is completely gone at $438,000 in income. Taxpayers in the phase out range will receive a reduced credit.
Examples of qualifying expenses include:
In-home nurse or similar care giver
Pre-school and after-school care
You may still be eligible for the credit even if you pay a relative to watch your children. Ask your tax professional about your eligibility.
Who is eligible?
You may be eligible if you pay someone to care for a qualifying person while you work, look for work, or attend school.
A qualifying person includes:
Your dependent child under age 13 at the time of the care
Your spouse who is unable to care for themselves due to a mental or physical disability
A dependent of any age who is unable to care for themselves due to a mental or physical disability
Certain relatives who are unable to care for themselves due to a mental or physical disability and would have been your dependent if not for the gross income test (4,300 in 2021) or were claimed by someone else
To claim this credit at tax time you will have to provide us with the name of the care giver, social security number (if a person), Employer Identification Number (if a business), address of the care giver, and the amounts paid for each person receiving care. (Non-profit daycares do not need to provide an EIN.)
Please contact Heather Amador if you would like more information | 260-484-1673