Posted by Taxes Made EZ Inc

Dependent Care Deductions Can Save Money on Taxes

Dependent Care Deductions Can Save Money on Taxes

When it comes to taxes, we are always seeking ways to save money, pay less, or have returns. So regarding dependent care like taking care of children, everyone in that category wants to know how deductions can save them money on taxes. 


Well, the American Government has provided a few choices that will help you pay off your child-based expenses whenever you file taxes annually. Regardless of if your expenses are for daycare, dependent care, and summer care, or after-educational care, 3 tax credits can lower your debt to the IRS. 


When your debt to the IRS is reduced, it can place some money in your account, these credits will make up some of the beneficial ways for guardians, and parents, to reduce their tax bills. 


The three alternatives to subtract child care expenditures: 


The child tax credit 

This system is not a new one, but it has some unique features from the “Tax Cuts and Jobs Act,” which was submitted in December 2017. Taxpayers with kids under 17 can collect the Child Tax Credit if they meet the IRS qualification necessities. 


  • On this scheme, the highest credit is at two thousand dollars for each child that qualifies (they must have a useable Social Security number)

  • A part of the credit is returned, and that is up to $1,400

  • You can claim a tax credit at $500 or qualifying dependents that are above 16. But they must be American citizens, nationals, or resident aliens. 

  • The IRS has an online interview process to help you ascertain if you meet the requirements for this child tax credit. 


The child and dependent care credit

Have you employed someone else to care for your child or dependents living in your home so you and your partner can work? If yes, then the child care credit will help lessen your tax bill to the American government. Tax paying couples with children under 13 can apply credit to tax returns, but they must meet the IRS requirements. 

  • Get 20% - 35% of the eligible dependent care costs as credit on your tax return. This credit affects up to three thousand in care-based expenses for a single dependent. 

  • Credit is accessible irrespective of your income. However, the percentage is called allowable expenses, which is 20-35% can differ based on how much money you make.

  • The credit is NOT refundable; although it will reduce your tax bill, the IRS will not issue any surplus share as a repayment. 


The earned income tax credit

This is also known as EITC, and it helps workers having low to average income. If a married couple files jointly, they must earn $56,844 or below and take the credit, but both high income limit and scope of the tax credit can vary depending on some factors like filing status, earnings, and the number of kids.


  • The grossed revenue tax credit is repayable. If credit lowers your tax bill to nothing, you may achieve the excess amount in a refund from the IRS. 

  • The highest credit as of 2020 was at $6,660, which may be accessible to single, or head of household filers with qualifying kids. They should also have an adjusted gross income (this is $50,954 or less).

  • The minimum earned income tax of $538 can be obtainable to single filers without qualifying kids who earn $15,820 or below. For a married couple filing together, the limit on adjusted final income is $21,710. 


The process of registering your taxes can be complex, and more importantly, you wouldn’t want it to lead to paying less and getting into trouble with the IRS. But that doesn’t mean you should leave your tax credits or subtractions because nobody wants to submit more than they are indebted in taxes. 


FOR MORE INFORMATION ON HOW TAXES MADE EZ, INC. CAN BEST HELP YOU WITH YOUR TAX FILING NEEDS, PLEASE CLICK THE BLUE TAB ON THIS PAGE.


THANKS FOR VISITING.

Taxes Made EZ Inc
Contact Member