Tax Law Changes: Dependent Care

Did you take care of a child or other dependent during the 2011 tax year? If so, you may be eligible for dependent care tax credits. This can add up to valuable savings for your household. So, be sure to take advantage of the full amount allowable.

For 2011, you could deduct up to 20-35% of your qualified dependent care expenditures, up to a maximum of $3,000 for the first person, and up to $6,000 if you are caring for 2 or more eligible dependents. The amount eligible to deduct on your return will be dependent upon your adjusted gross income.

Can you Deduct Dependent Care? Rules for the Filer

In order to claim this deduction, there are four requirements that must be met, which include:

• If the filers are married, they must file a joint return.
• The care must be provided or used so that the filer(s) can work.
• The household must claim earned income for the 2011 tax year.
• The filer must have lived with the dependent being claimed for at least 50% of the calendar year.

In addition, the person providing the care cannot be a spouse, the child’s parent, or someone else being claimed as a dependent.

Can you Deduct Dependent Care? Rules for the Person Receiving Care

The person receiving dependent care must be under the age of 13, spouse or family member. The adult receiving care must be unable to care for themselves independently. In addition, the care can be received/provided either inside or outside of the home.

Keep in mind that while you may be eligible to claim these deductions, not all dependent care costs can be included on your return. For more information on whether you qualify for this tax credit, be sure to speak with your tax professional.