The child care tax credit is a tax credit which is non refundable in nature. This tax helps the working guardians to bear all of the expenses of their child. The above written tax relaxes the heavy burden of the expenditure for their child. As the tax is non refundable, therefore the taxpayer only receives the tax refund of amount that s/he only owes which is upto $1400. Child care tax credit reassures the working single parent or spouses to take care of the little ones. The amount of the tax credit depends hugely on the earnings of the working parents.
Child Care Tax Credit Income Limit
The child care credit percentage range varies between 20% – 35%. The mentioned percentage is based on the income of the one who is enjoying the tax credit. If the income of the person is below $15000, then the tax credit percentage will qualify for the whole off 35%.
As and when $2000 is added to the income, the credit rate drops off by 1% each until and unless it reaches 20%. The 20% of child care tax credit is for the income group whose earnings are $43000 or
above. This is how CTC is being calculated.
Child Care Tax Credit Form
For claiming the child tax credit, one person needs to complete a certain form. The form is 2441, ‘child and dependent care expenses’ with another form filled up i.e, 1040. The form will take all the information of the parent including the income of them. In accordance to the income level that is mentioned in the form, the percentage is allowed based on it. For claiming the tax credit, the parents need to have the earning income, which is earned from employment. The requirements in order to fill the form 2441 is clearly and neatly mentioned in IRS. Themarried ones needs to fill the whole form in a joint manner and not separately.
Child Care Tax Credit vs FSA
Dependent care FSA or dependent care benefits can be defined as the account of employer sponsored pre tax. The spontaneous subtraction from the payment cheques are added to this account where up till $5000 can be claimed for the child funding the dependent care expenses. If the two parents sign for this separately i.e, married filling jointly even then, they will be benefited only upto the tax bracket of $5000.
This tax is even sheltered away from the social security (7.65%) and also sometimes from the taxes of
On the another side, dependent child care tax credit can be a direct way of lessening the tax which the taxpayers owe. The ones who cannot opt for any other benefit, has the option to equilibrate the child care tax for their family itself.
Child Care Tax Credit Phase Out
As the Adjusted Gross Income grows higher up, the child care tax credit starts phasing out. The meaning of the line mentioned is that, when the tax payer breaks the maximum income step, s/he can only claim the credit partly.
The monetary amount that one is allowed to claim decreases gradually with increase in income. The CTC phase out starts at $200000 (adjusted gross income) for single parents. Once the adjusted gross income crosses $240000, no longer s/he is allowed to claim. The joint fillers have the right to claim the credit till $400000.
Child Care Tax Credit Age Limit
When the CTC is provided the dependent and qualifying child will need to be under the age 13. Also, for those who are above 13 but not mentally stable for carrying themselves forever. They can be one’s spouse or dependent child.
The publication 503 child and dependent tax credit, explains clearly that through which tests a parent must go in order to claim the credit or dependent expenses for care. The required age and all other information which is deliberately required are mentioned in this publication. The child for whom a parent is taking the benefit, that similar child cannot be claimed by any other.
Nowadays, the child care expenses are really high and needs great care to maintain it. Anyway, now there’s a chance to cut it off by some amount under CTC. One can have the basic idea of CTC from the above article. Hope, this one has come to my reader for some help.
Source: Child Care Tax Credit