Do I Have to Itemize for a Childcare Deduction?
Paying a person or entity to care for your child or children while you work or look for work can be an expensive proposition for the even the wealthiest of people. The Internal Revenue Service acknowledges the need for proper childcare while parents work by offering taxpayers the Child and Dependent Care credit as a beneficial tax break.
You may choose to itemize your deductions to reduce your taxable income for the year and reduce the amount of money owed to the IRS. Many taxpayers choose to itemize their deductions, if their total deductions are more than their standard deductions. If you intend to claim the Child and Dependent Care credit, you will need to itemize your deductions, per IRS regulations.
Dependent Care Credit
After choosing to itemize your deductions, you may claim the Child and Dependent Care credit on Form 1040, 1040A or 1040NR. The IRS places a dollar limit on the amount of expenses paid for the year to claim the credit. For tax year 2012, the dollar limit is $3,000 for one qualifying child and $6,000 for two or more qualifying children.
The Internal Revenue Service incorporates the Qualifying Persons Test as a method to help taxpayers discern if they qualify for the Child and Dependent Care credit. When the care is provided, the qualifying child must be at least 13 years of age or under. The child must live with you for more than half the taxable year. After age 13, any childcare expenses paid for the care of the child during the calendar year do not qualify for the credit.
You must provide your childcare provider's name, taxpayer identification number and address to claim the credit. Child and dependent care companies can provide you with their federal employer identification number. If the provider was a person, you may use her Social Security number as her taxpayer identification number. You may include dependent care payments to relatives. However, you may not claim the credit for payments made to anyone whom you or your spouse can claim as a dependent on your federal tax returns.
Marie Huntington has been a legal and business writer since 2002 with articles appearing on various websites. She also provides travel-related content online and holds a Juris Doctor from Thomas Cooley Law School.