Child Tax Credit - Tax Return Preparation.

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CREDITS - CHILD DEPENDENT CARE

Why am I not getting the Child Tax Credit?

The Child Tax Credit is claimed on line 51 of your Form 1040 or line 33 of your Form 1040A.

The Child Tax Credit is a non-refundable credit. The regular Child Tax Credit allows you a tax credit of $1,000 per child up to a maximum of your tax liability. It can be used to reduce your tax to zero but the excess is not refunded.
Child 17 or over. Your child must be under the age of 17 at the end of 2008. If your child was 17 or older on 12/31/05 they do not qualify you for the credit.
Phased out due to high income. The credit is reduced or eliminated for taxpayers with high incomes. For those filing a joint return the phase-out of the credit begins at modified adjusted gross income (AGI) of $110,000 and it is completely phased out at $130,000. For single and head of household filers the phase out begins at $75,000 and is complete at $95,000. For those filing a married but separate return the phase out begins at $55,000 and is complete at $75,000.

You may be eligible for the additional Child Tax Credit. It allows you to claim a refund of the unused portion of the regular Child Tax Credit. The amount of the additional Child Tax Credit is the lesser of:

The unused portion of the regular credit.
15% of the amount your AGI was over $10,750.
Your Social Security and Medicare Withholding.

The additional Child Tax Credit is claimed on line 67 of your Form 1040 or line 42 of your Form 1040A. You can see the details of the calculation on form 8812.

Can I deduct the Child Tax Credit on my tax return?

Your Maximum Allowable Child and Dependent Care Tax Credit

Adjusted Gross Income	Credit Percentage	One Dependent	Two or more Dependents

$15,000 or less	35%	$1,050	$2,100

$15,001-$17,000	34%	$1,020	$2,040

$17,001-$19,000	33%	$990	$1,980

$19,001-$21,000	32%	$960	$1,920

$21,001-$23,000	31%	$930	$1,860

$23,001-$25,000	30%	$900	$1,800

$25,001-$27,000	29%	$870	$1,740

$27,001-$29,000	28%	$840	$1,680

$29,001-$31,000	27%	$810	$1,620

$31,001-$33,000	26%	$780	$1,560

$33,001-$35,000	25%	$750	$1,500

$35,001-$37,000	24%	$720	$1,440

$37,001-$39,000	23%	$690	$1,380

$39,001-$41,000	22%	$660	$1,320

$41,001-$43,000	21%	$630	$1,260

$43,001 and over	20%	$600	$1,200

Child and Dependent Care Credit - Household and Dependent Tests

In order to claim the Child and Dependent Care Credit you must maintain as your principal home a household for at least one of the following qualifying persons who live with you:

a child under 13 years of age whom you claim as a dependent;
your spouse if your spouse is physically or mentally incapable of caring for himself or herself;
a person who is physically or mentally incapable of caring for himself or herself regardless of age.

Child and Dependent Care Credit - Qualifying Expenses

The following qualifying expenses (maximum $3,000 for one dependent, $6,000 for more than one) must be reduced by any tax free reimbursements that you receive from your employer:

costs of caring for your dependent under age 13, incapacitated spouse, or incapacitated dependent in your home;
ordinary domestic services in your home, such as cooking, cleaning, and laundry that are partly for the care of the qualifying person;
Out-of-the-home care costs for a child under age 13 in a day care center, day camp, nursery school, or in the home of a baby sitter. These costs also qualify for the Child and Dependent Care Credit if they are for a handicapped dependent, regardless of age, if he/she spends at least eight (8) hours per day in your home.

To claim the Child and Dependent Care Credit, each child for whom the Child and Dependent Care Credit is claimed must have a Social Security or Taxpayer Identification Number.
Special Child and Dependent Care Credit tax rules apply if your spouse is a student is incapable of caring for himself or herself, for separations, and for payments to relatives.

What are qualifying expenses for child and dependent care?

Qualifying expenses are for the care of a qualifying person with the main purpose of the expense being the person's well being and protection.

When determining Child Care Credit, what is the additional earned income for students or the disabled?

Generally both spouses must work, unless, one is incapable of self-care or is a full-time student. If only one spouse is working, and the non-working spouse was a full-time student or disabled, an earned income is assumed for each month of school attendance or full disability. The earned income is $250 per month if there is one qualifying child or dependent, or $500 per month for two or more qualifying children or dependents.

My spouse and I both work and are eligible for the Child and Dependent Care Credit. May I include my 5 year old son's parochial school kindergarten tuition cost as a qualified expense in Form 2441, Child Care Expenses?

The expenses for kindergarten do not qualify for the dependent care credit because kindergarten is primarily educational in nature. However, you can count the part of the expenses of sending your child to school that is for your child's care if it can be separated from the expenses of education. For example, you may count the cost of an after school care program even though the school tuition does not qualify.

I was under the impression that a Dependent Care Benefit Plan would benefit me, not penalize me with an increase in taxes. How can my employer say they provided a benefit in the total amount of $3,000 in W-2, Block 10 when I had $3,000 in wages set aside for dependent care benefits?

The actual mechanism for this type of plan is an agreement to voluntarily reduce your salary in return for an employer-provided fringe benefit. These plans must be set up this way because you have a choice of whether to receive the cash wages or the benefits, which would make the benefit taxable to you. Therefore, the benefits are actually employer provided or funded. You are receiving a tax benefit because you are not paying taxes on the money that is set aside.

How do I complete Form 2441 if I have flexible Spending Account?

You must complete Part III of Form 2441 (PDF), Child and Dependent Care Expenses, (or Form 1040A, Schedule 2 (PDF), Child and Dependent Care Expenses for Form 1040A Filers) to claim the exclusion of the benefits from income even if you cannot claim the credit. Enter your total employer-provided dependent care benefits on the correct line (this amount should appear in box 10 of your Form W-2) and your qualified expenses on the correct line. The last lines of Part III will determine whether you can also take the credit and what your dollar limit is on qualified expenses. Also complete Part I, Persons or Organizations Who Provided the Care.

For Efile your Income tax return You need only :


Online Tax Return Service		OR :
		A copy of last years tax return Personal identification (driver's license, social security card) for you and your spouse, if applicable, showing the SSN (s). W-2s from all of your employers Forms 1099 & 1099-G, 1099-DIV, 1099-R. All receipts pertaining to your small business Social security benefits Unemployment Compensation Other Income Income receipts from rental real estate, royalties, partnerships, s corporation, trusts

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