The CDCTC is often confused with
the CTC, but it’s not the same credit. You can take this credit if you had a
minimum earned income amount for this tax year and you’re paying for the care
costs of a dependent.
You can claim the child and dependent care credit if you’re a godparent, caring for elderly parents, or
paying for the care of disabled relatives.
To qualify, dependents must be:
·
12 or under, in the
case of children, when the tax year ends.
·
An adult family
member or spouse who isn’t able to cover their own care needs due to physical
or mental disabilities. These dependents must have a gross income of $4,150 or
less.
The CDCTC can be used to claim
back qualified care expenses up to 35% of the total cost. The percentage you
can deduct, again, depends on how much you earned during the tax year.
The credit can be applied to care
expenses of $3,000 for a single dependent or $6,000 for more dependents. The
biggest credit amount you can claim is $1,050 for a single dependent and $2,100
if you have more than one dependent. You can estimate your credit with the child dependent care calculator.
This is not a refundable tax
credit and must be used for expenses involving care while you work (or are
looking for work) or household services.
The CDCTC doesn’t include child
support.
Use Form 2441 if you’re eligible
to claim this tax credit.
What about State Child Tax Credits?
Certain states also have the
above credits at the state level. They usually partially match or fully match
the Federal versions of these tax credits.
Depending on the state, they may
also be refundable.
You should check out whether your
state offers these credits and how much they’re worth.
What You Should Take from this Guide
The IRS provides help to parents
and guardians when they want to raise a family. They also provide support to
people who are caring for other dependents. Parents should be claiming the CTC
because most Americans are now eligible for the full credit. For those with low
tax bills, it’s possible to get a tax refund out of it.
To make sure you’re claiming
these tax credits correctly, you should consult a tax professional to help you
out. That way everything can be taken into account and you can avoid overpaying
the Federal government or leaving money on the table.
Tips for Saving Money When You File Your Taxes this Year
·
Do everything you can
to reduce your tax bill by claiming credits and deductions. Try to take
everything you’re eligible for. Many taxpayers make the mistake of failing to
apply for every credit and deduction they’re eligible for. This is why you should
consider the low cost of TurboTax for your taxes.
·
Look into savings
accounts like the 401(k) and the health savings account (HSA). These allow you
to stow away pre-tax money, so you can start saving before you even begin
paying taxes. Making these contributions will also lower your overall taxable
income and may put you in a different tax bracket. The changes to the tax
brackets make it more likely that you’ll find yourself in a lower bracket than
in previous years.
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