The IRS offers a child care tax credit to those who pay child care costs, which enable taxable income to be earned. You don’t need to pay a child care facility or private, licensed care provider to get credit for your expenses – the IRS allows you to count amounts you pay to a family member toward the credit. The child care credit can reduce the tax you owe on your income, which could also boost a tax refund if you’re expecting one.
Qualifying Child and Expenses
If your child is under age 13, or is over age 13 and is a disabled dependent whom you claim on your tax return, you may qualify for the child care tax credit. You can include amounts you pay your mom to babysit so you can work or go to school, but you must have some earned income during the year for qualified expenses to count for the credit.
IRS Form 2441
If you qualify for the credit, you’ll use IRS Form 2441 to claim your credit. You can use up to $3,000 in qualified expenses per child to calculate the credit. Your credit will consist of a percentage of the per-child expense claimed, and the percentage you receive depends on the amount of income you have during the year. Your child care credit will reduce the tax on your income to zero, but not below that. If your credit equals more than your income tax, you will lose some of your credit as the excess does not carry over to future years.
IRS Form 2441 requires you to report information about your child’s caregiver. This means you’ll need to provide your mother’s name, address, Social Security number and amount you paid her during the year. If you have more than one child cared for by your mother, you’ll need to list your mother’s information separately for each child, along with the amount you paid her for each child.
Additional State Credit
As of this publication, some states, such as Colorado, New York and Oregon, offer an additional credit on your state tax return for child care expenses you claim. Each state’s requirements for the credit vary and are subject to changes each year. Check with your state of residence to determine whether the state offers its own version of the credit and how to report it on your state return.
With a background in taxation and financial consulting, Alia Nikolakopulos has over a decade of experience resolving tax and finance issues. She is an IRS Enrolled Agent and has been a writer for these topics since 2010. Nikolakopulos is pursuing Bachelor of Science in accounting at the Metropolitan State University of Denver.