The tax season for this year begins on Monday, January 24. Parents should expect to receive the remainder of their child’s tax credit money after submitting their tax returns, but that isn’t the only significant advantage for parents this season. The child and dependent care credit have also been significantly enhanced, with a maximum effective return of $4,000 for one kid and $8,000 for two or more.
Increase to Have Significant Impact
According to Kiplinger, millions of families file their 2021 tax returns this year, they will receive a more considerable child care credit, and many more Americans will receive the total credit amount for 2021. In addition, many households may receive tax refunds due to this, which was not the case previously. For millions of people who had child or dependent care bills last year, these improvements will have a substantial impact on their bottom line.
As the name implies, the child and dependent care credit aren’t solely for childcare. It also covers expenses for the care of others, in addition to the costs of caring for a child under thirteen.
The child and dependent care credit allow taxpayers to deduct the amount spent on a child or dependent care costs such as daycare, babysitters, or related transportation from their taxes. According to a past expansion in the American Rescue Plan Act, parents who paid for child care in 2021 can claim $8,000 in costs for one dependent or $16,000 for multiple dependents. In addition, it raised the return rate on child care expenses from 35% to 50%, the MSN posted.
Requirements Remained Unchanged
The general requirements, on the other hand, remained unchanged. That is, can only be used the credit for dependent care supplied so that you can work or look for work (or, perhaps, attend school). In general, you (and your spouse, if filing jointly) must have earned income during the year to claim the credit.
Keep in mind that if you have a dependent care flexible spending account, the child-care expenses you pay with it will not be eligible for the tax credit. The money you put into that account is pre-tax, which means you get a tax break right away.
Read More About: