How Much Money Can You Claim From Your Daycare Expenses?
- The only day care expenses considered tax deductible are forms of care provided while you are working or job-hunting. These include preschool, day care and child care centers, as well as before- and after-school child care. Tutoring and overnight camp programs are not deductible. Taxes you pay on wages for child care services and dependent care services are work-related expenses and are therefore considered tax deductible. Eligible deductions do not typically cover things such as entertainment, food or clothing. However, if those items are part of an overall care package and cannot be itemized, they may be involved in the deduction. Examples include a day care center that provides a snack every day, after-school care that involves going to the movies or a preschool that decorates T-shirts for a holiday party.
- The amount of money you can deduct from your taxes for day care expenses is based on a percentage of your work-related expenses and your adjusted gross income. As of the 2010 tax year, the annual limit on how much you can deduct was $3,000 for one qualified dependent or $6,000 for two or more qualified dependents. A non-custodial parent cannot claim a tax deduction for child care expenses even if he claims the child as a dependent on his tax returns.
- To determine how much of your day care expenses you can deduct, multiply your work-related expenses by the percentage that corresponds with your adjusted gross income. Percentages range from 20-35 percent. An income conversion chart is available through the Internal Revenue Service and is located in the resources section of this article. To qualify for a deduction, a taxpayer must have earned income from the year the deduction is applied. Typically, only taxable income qualifies as earned income. It does not include unemployment pay, child support, social security or pension payments.
- To claim your eligible day care deductions on your tax return, you must identify the care provider including name, address and taxpayer identification or social security number. Use Form W-10, Dependent Care Provider's Identification and Certification. Use Form 1040, Form 1040A or Form 1040NR to file your deduction.