In order to claim the credit, the taxpayer must meet ALL of the following requirements:
- The care must have been provided for one or more qualifying persons. A qualifying person is your dependent child age 12 or younger when the care was provided. Additionally, your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. You must identify each qualifying person on your tax return.
- The taxpayer - and spouse if filing jointly – must have earned income from wages, salaries, tips, other taxable employee compensation or net earnings from self-employment. One spouse may be considered as having earned income if they were a full-time student or were physically or mentally unable to care for themselves.
- The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.
- The payments for care cannot be paid to your spouse, to the parent of your qualifying person, to someone you can claim as your dependent on your return, or to your child who will not be age 19 or older by the end of the year even if he or she is not your dependent. You must identify the care provider(s) on your tax return with their name, address, and taxpayer identification number (SSN or EIN).
- Filing status must be single, married filing jointly, head of household or qualifying widow(er) with a dependent child.
- The qualifying person must have lived with you for more than half of 2010. There are exceptions for the birth or death of a qualifying person, or a child of divorced or separated parents. See Pub. 503 Child and Dependent Care Expenses.
- To calculate the credit, you may use up to $3,000 of expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals. The qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer (reported in box 10 of Form W-2) that you deduct or exclude from your income.
Summer Day Camp may qualify for the tax credit. The cost of day camp (overnight camps do not qualify) may count as an expense. The use a childcare provider can either be a sitter at the taxpayer’s home or a daycare facility outside the home.
If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer and may have to withhold and pay social security and Medicare tax and pay federal unemployment tax. See Pub. 926 Household Employer Tax Guide.
Refer to the Form 2441 Instructions for more information.