Federal Tax Credits
Child and Dependent Care Tax Credit
Helps families pay
for child care for children under the age of 13, if the parents are working, or
looking for work. Parents who are full-time students can also claim the credit.
Qualifying care includes child care centers, family child care homes, and care
provided by paid friends or relatives -- as long as the relative is not a
dependent of the taxpayer. The size of the credit depends on the number of
children in care, your family income, and the amount you paid for child care
during the tax year. There are limits on the credit given for one child, and two
or more children.
Earned Income Tax Credit
A refundable tax credit for low- and moderate-income
families, particularly those with children. The EITC is based on family income
and the number of children in the family. Both single- and two-parent families
are entitled to the credit, as long as one parent is employed. A number of
states have their own Earned Income Tax Credits; check with your state
department of revenue for more information.
State Tax Credits
Twenty-four states have state tax programs related to
the Child and Dependent Care Credit. Check with your state department of revenue
for more information.
In-Home Care or Nanny Tax
When you hire an in-home caregiver, you become an
employer under federal law. You need to be aware of laws regarding taxes,
verification of employment eligibility, and minimum wage.
For information on these topics, contact the Department
of Labor , the Internal Revenue Service, an accountant, a tax advisor, or an
insurance agent.
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