Question

1. Taxpayers can claim a child tax credit for a qualifying child. Define qualify child.
2. For purposes of the tax credit for child and dependent care expenses, explain the limitations concerning the amount of qualified expenses that can be used to calculate the credit.

Answer 1

1)

A Qualifying Child is a child who meets the six IRS requirements to be a dependent for tax purposes. The qualifying child may enable the taxpayer to take advantage of several tax benefits, such as Head of Household, the Earned Income Credit, the Child Care Credit, and the Child Tax Credit.

2)The child and dependent care tax credit is a percentage of your daycare expenses up to $3,000 for one dependent or $6,000 for two or more dependents. But these figures aren't the amount of your credit

The Child and Dependent Care Credit can help offset some of the costs you pay for the care of your child, a dependent or a spouse. Here are 10 facts the IRS wants you to know about the tax credit for child and dependent care expenses.

1. If you paid someone to care for your child, dependent or spouse last year, you may qualify for the child and dependent care credit. You claim the credit when you file your federal income tax return.
   
2. You can claim the Child and Dependent Care Credit for “qualifying individuals.” A qualifying individual includes your child under age 13. It also includes your spouse or dependent who lived with you for more than half the year who was physically or mentally incapable of self-care.
   
3. The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.
   
4. You, and your spouse if you file jointly, must have earned income, such as income from a job. A special rule applies for a spouse who is a student or not able to care for himself or herself.
   
5. Payments for care cannot go to your spouse, the parent of your qualifying person or to someone you can claim as a dependent on your return. Payments can also not go to your child who is under age 19, even if the child is not your dependent.
   
6. This credit can be worth up to 35 percent of your qualifying costs for care, depending upon your income. When figuring the amount of your credit, you can claim up to $3,000 of your total costs if you have one qualifying individual. If you have two or more qualifying individuals you can claim up to $6,000 of your costs.
   
7. If your employer provides dependent care benefits, special rules apply. See Form 2441, Child and Dependent Care Expenses for how the rules apply to you.
   
8. You must include the Social Security number on your tax return for each qualifying individual.
   
9. You must also include on your tax return the name, address and Social Security number (individuals) or Employer Identification Number (businesses) of your care provider.
   
10. To claim the credit, attach Form 2441 to your tax return. If you use IRS e-file to prepare and file your return, the software will do this for you.