Many American families are probably aware of the $3,600 child tax credit that just expired in December – but some may not know about another benefit they can get for having kids.
Qualifying expenses include babysitters, transportation, and housekeeper fees[/caption]
The child care credits aim to help working families offset expenses when financially providing for a child.
Specifics that count as qualifying expenses include, transportation, housekeepers, babysitters, before and after school programs, as well as day camps and daycare.
Moreover, they can be used to care for dependents with disabilities.
Thanks to the expansion under the Rescue Act, many more Americans will be able to claim the care credits this year.
How it works
The new law allows families to claim up to 50% of qualifying expenses.
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Care credits are only available for children under the age of 13, but there might be an exception for a dependent who is unable to take care of themselves.
You claim the maximum expense rate as long as adjusted gross income (AGI) is $125,000 or less.
Once that threshold exceeds that number, the credit percentage rate starts to phase out from 50%.
Specifically, families with more than one kid who spend $16,000 in qualifying expenses will be able to claim care credits of up to $8,000.
Claimants with one child can receive credits of up to $4,000 in expenses.
How to claim
Those eligible for the care credits can claim them as a one-time payment – unlike the child tax credits – which were sent out in monthly installments.
The care credits can be claimed on your tax return this year.
The IRS typically starts accepting tax returns at the end of January, but it hasn’t yet announced a date.
Tax expert Ahad Ali recently broke down how families could get the care credits and he noted that both parents need to be working to be eligible.
Also, eligible families who failed to claim their $1,800 child tax credit payments in 2021, can get the full $3,600 amount on their tax return this year.
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