Childrearing is expensive and many parents have struggled to get through the pandemic that continues to be ongoing over the past three years. However, this year families may qualify for a larger tax refund this year based on childcare expenses over the past year.
The Child and Dependent Care Credit, which provides a credit for parents who come out of pocket for daycare costs has gotten a large boost this year as a part of the ongoing stimulus efforts. Normally limited at $3,600 per year, the refundable credit has more than doubled for those filing in 2022.
- Up to $8,000 for one qualifying child
- Up to $16,000 for two or more qualifying children
According to guidelines from the Internal Revenue Service, you may also meet criteria such as the following to fully allow you to claim the credit:
- Having a mentally or physically ill spouse who couldn't provide their own self-care and resided with you for more than six months out of the year
- Have a dependent child under the age of 13 years old when they were receiving care
- Be an individual who is mentally or physically incapable who resided with you for more than six months and either:
- Considered your qualifying dependent
- Would have been a dependent if they hadn't grossed $4,300 in income
- Filed a joint tax return
- Eligible to be claimed as another person's dependent
Currently, the Child and Dependent Care Credit(CDC) allows reimbursement for as much as 50% of eligible expenses for parents making less than $125,000 per year. The amount drops to 20% if you are bringing in more than that but less than $183,000 each year. Families may also be permitted to write-off between $4,000 and $8,000 in childcare costs if they fall under a different tax situation.
With just over 30 days remaining in the tax season, this extra boost could provide some much-needed cash just in time for the Spring and the credit extends to those who won't end up owing federal income taxes as well.