Understanding the child and dependent care credit is essential for ensuring your clients maximize their tax savings while staying compliant with IRS rules. You need to be equipped with this knowledge to accurately determine eligibility based on qualifying expenses, income and dependents – helping you file error-free returns and provide expert guidance.
Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers.
Q: Can the caregiver be a grandparent (e.g., not an official day care or preschool)?
A: Facts and circumstances will dictate. The expenses must be paid to someone whom the taxpayer (and spouse, if filing jointly) cannot claim as a dependent.
Q: If the parent works night shifts, can overnight summer camps count as dependent care?
A: The cost of day camps may be considered employment-related expenses. However, the cost of overnight camps does not qualify.
Q: Can a payment made to an ex-spouse to pay for day care expenses count as payment to a provider?
A: Not if the ex-spouse is the qualifying person’s parent. You can count some work-related payments made to other relatives, even if they live in your house. However, do not count any amounts paid to:
- A person you (or your spouse, in the case of a joint return) can claim as a dependent
- Your child who was under age 19 at the end of the year, even if the child isn’t your dependent
- A person who was your spouse at any time during the year, or
- The parent of your qualifying person if your qualifying person is also your child and under age 13
To learn more about child and dependent care credit benefits, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.
About National Association of Tax ProfessionalsThe National Association of Tax Professionals (NATP) is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of over 23,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers.
The NATP headquarters is located in Appleton, WI. To learn more, visit www.natptax.com.
Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.