What is the “Child Care Credit” ?
Congress has beefed up the tax credit for eligible dependent care expenses during the pandemic, but those changes have run their course. Don’t fret, though. There’s still plenty you can do to maximize this refundable credit in 2024 with a bit of savvy tax planning.
First off, let’s clear something up. Although often dubbed the “child care credit,” it’s not just for children. The dependent care credit covers costs for caring for children under 13 while you and your spouse (if married) work.
Amounts you can Claim
Now, under current laws, here’s the deal: if your adjusted gross income (AGI) tops $43,000, you’re eligible for a credit. It’s 20% of the first $3,000 of qualified expenses per child under 13, or 20% of the first $6,000 for two or more children in that age bracket. That usually means a max credit of $600 per child or $1,200 for two
How to get more
Now, let’s get to the juicy part – how to pump up that credit in 2024:
- Pay your babysitting parents: Your parents might not normally accept money for watching their grandkids, but if they’re in a tough spot financially, consider compensating them for babysitting. As long as the amount is reasonable, it qualifies for the dependent care credit. You could also consider paying one of your adult children if they’re helping out.
- Expand the housekeeper’s duties: If you have a housekeeper or maid, consider asking them to watch the kids while they’re on the clock. The IRS allows household service costs to qualify for the credit if they involve child care. Just remember, only the child care portion of the expense counts. Sorry, no credit for chauffeurs or gardeners!
- Tap into an FSA: Flexible spending accounts (FSAs) are a great way to cover dependent care expenses. Not only do you dodge federal income and payroll taxes, but you might even save on state income tax. You can stash up to $5,000 in your FSA for dependent care, but remember, you can still claim the credit for expenses beyond that.
- Go back to school: Both spouses need to be “gainfully employed” to qualify for the credit. But don’t worry, if one of you is a full-time student, you still meet the criteria. A student needs to attend classes for at least five months of the year, not necessarily consecutively, to qualify. Plus, a full-time student is treated as having earned income, which boosts your credit.
- Camp out for the credit: Look into specialty day camps for your kids. Whether they’re into soccer, football, or pirate adventures, specialty camps can qualify for the credit just like regular day camps. Unfortunately, overnight camps don’t make the cut.
So, there you have it – some nifty ways to squeeze every last drop out of the dependent care credit in 2024. Happy saving!
Get Tax Compliant and Get Tax Relief
Morris and Associates are experts when it comes to helping individuals and companies find tax relief in Georgia but can help no matter where you live. If you owe money to the IRS and need help, contact us to help reduce the amount you owe.
