20 Jun Dependent Care Credit IRC 21
According to Internal Revenue Code Section 21, the maximum tax credit as of this posting date remains at $1,050 (35% of $3,000) forÂ one qualifying individual and $2,100 (35%Â of $6,000) for two or more. This credit is forÂ expenses paid for the care of your qualifying children under age thirteen, or forÂ a disabled spouse or dependent, to enable you or your spouse (if Married Filing Jointly) to work or look for work.
A qualifying person is a dependent child, age twelve or younger and/or your spouse or other certain individualsÂ who are physically or mentally incapableÂ of self-care.
In order to qualify you (or your spouse if MFJ) must haveÂ earned income from wages, salaries, tips,Â other taxable employee compensation, or netÂ earnings from self-employment.
1. Payments for care can not be made to a spouse or dependent.
2. You are precluded from the credit if your filing status is Married/separate.
3. The qualifying person must have livedÂ in the home with you for moreÂ than 6 months.
4. You may use up to $3,000Â of expenses paid in a year for oneÂ qualifying individual or $6,000 for twoÂ or more qualifying individuals to figureÂ the credit.
5. Qualifying expenses must beÂ reduced by the amount of any dependentÂ care benefits provided by yourÂ employer that are excluded from income.
If an individual is paid to come to yourÂ home and care for yourÂ dependent or spouse, you pretty much by default becomeÂ a household employer liable for employment tax reporting and payment obligations. Check out IRS Publication 926.