Claiming the Child and Dependent Care Tax Credit

The IRS offers measures for offsetting the steep financial obligations obliged by parenting and child care by allowing taxpayers to claim child tax credits and thereby reduce their required tax liability. To this end, federal income tax returns come with Child and Dependent Care Credit boxes to be checked off by the applicant if these are applicable.

A childcare tax credit may be claimed by American taxpayers if they paid for the care of a child or some other dependent to be provided by another person. Before claiming child tax credits, a hopeful applicant should attend to the requirements provided by the IRS on its website in order to make sure that the nature of the dependent, his or her relationship to the applicant, and the care provided to him or her are covered by the American system of taxation.

One of the important criteria provided for the offering of child tax credits is the reasonably established ability of dependents to provide for their own well-being without the help of a caregiver, which if found to be sufficiently the case may block the applicant from receiving a childcare tax credit. This consideration may be made by the IRS based either on the age of the dependent or his or her mental or physical fitness.

A dependent who is a child of or under the age of twelve, for instance, may be covered by child tax credits. Dependents above that age who are, for some reason of physical infirmity or mental disability, unable to reliably to take care of themselves, may also be considered to technically fall within the bounds established for a childcare tax credit. With a few exceptions, the child or dependent should have been in the same household as the applicant for more than half a year.

The IRS excludes from consideration under child tax credits services, such as those of nannies or other kinds of domestic employees, provided merely for the end of the parents' convenience and freedom from the burden of caring for their children themselves. Rather, the childcare tax credit is intended to provide for the necessity of a parent to also financially support children and other dependents.

To this end, the IRS will make the consideration of whether or not the outside care provider was contracted to allow the parent to seek employment, as opposed to the "frivolous" end of increasing leisure time. The kinds of care providers who may be claimed for the filing of child tax credits must indeed be outside of the applicable household and cannot include, for instance, the spouse of the applicant. Up to 35% of the expenses incurred for these services can be offset by child tax credits.

If the financial burden of child care is already eased to some extent by benefits provided through the applicant's place of work, then the amount provided in this way will be subtracted from the claimable expenses. Employing someone in a household can also impose certain tax obligations not directly covered by the childcare tax credit.

NEXT: A Brief History of Tax Credits