Publication 17
taxmap/pub17/p17-163.htm#en_us_publink1000174413Your credit is a percentage of your work-related expenses. Your expenses are subject to the earned income limit and the dollar limit. The percentage is based on your adjusted gross income.
taxmap/pub17/p17-163.htm#en_us_publink1000174414To figure the credit for 2012 work-related expenses, count only those you paid by December 31, 2012.
taxmap/pub17/p17-163.htm#en_us_publink1000174415If you pay for services before they are provided, you can count the prepaid expenses only in the year the care is received. Claim the expenses for the later year as if they were actually paid in that later year.
taxmap/pub17/p17-163.htm#en_us_publink1000174416Do not count 2011 expenses that you paid in 2012 as work-related expenses for 2012. You may be able to claim an additional credit for them on your 2012 return, but you must figure it separately. See
Payments for prior year's expenses
under
Amount of Credit
in Publication 503.
 | If you had expenses in 2012 that you did not pay until 2013, you cannot count them when figuring your 2012 credit. You may be able to claim a credit for them on your 2013
return. |
taxmap/pub17/p17-163.htm#en_us_publink1000174418If a state social services agency pays you a nontaxable amount to reimburse you for some of your child and dependent care expenses, you cannot count the expenses that are reimbursed as work-related
expenses.
taxmap/pub17/p17-163.htm#en_us_publink1000174419You paid work-related expenses of $3,000. You are reimbursed $2,000 by a state social services agency. You can use only $1,000 to figure your credit.
taxmap/pub17/p17-163.htm#en_us_publink1000174420Some expenses for the care of qualifying persons who are not able to care for themselves may qualify as work-related expenses and also as medical expenses. You can use them either way, but you cannot use the same expenses to claim both a credit and a medical expense deduction.
If you use these expenses to figure the credit and they are more than the earned income limit or the dollar limit, discussed later, you can add the excess to your medical expenses. However, if you use your total expenses to figure your medical expense deduction, you cannot use any part of them to figure your credit.
 | Amounts excluded from your income under your employer's dependent care benefits plan cannot be used to claim a medical expense deduction.
|
taxmap/pub17/p17-163.htm#en_us_publink1000174422If you receive dependent care benefits, your dollar limit for purposes of the credit may be reduced. See
Reduced Dollar Limit, later. But, even if you cannot take the credit, you may be able to take an exclusion or deduction for the dependent care
benefits.
Dependent care benefits include:
- Amounts your employer paid directly to either you or your care provider for the care of your qualifying person while you
work,
- The fair market value of care in a daycare facility provided or sponsored by your employer,
and
- Pre-tax contributions you made under a dependent care flexible spending
arrangement.
Your salary may have been reduced to pay for these benefits. If you received benefits as an employee, they should be shown in box 10 of your Form W-2. See
Statement for employee, later. Benefits you received as a partner should be shown in box 13 of your Schedule K-1 (Form 1065) with code O. Enter the amount of these benefits on Form 2441, Part III, line
12.
If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. Your employer can tell you whether your benefit plan qualifies. To claim the exclusion, you must complete Part III of Form 2441. You cannot use Form
1040EZ.
If you are self-employed and receive benefits from a qualified dependent care benefit plan, you are treated as both employer and employee. Therefore, you would not get an exclusion from wages. Instead, you would get a deduction on Form 1040, Schedule C, line 14; Schedule E, line 19 or 28; or Schedule F, line 15. To claim the deduction, you must use Form
2441.
The amount you can exclude or deduct is limited to the smallest of:
- The total amount of dependent care benefits you received during the year,
- The total amount of qualified expenses you incurred during the year,
- Your earned income,
- Your spouse's earned income, or
- $5,000 ($2,500 if married filing separately).
The definition of earned income for the exclusion or deduction is the same as the definition used when figuring the credit except that earned income for the exclusion or deduction does not include any dependent care benefits you receive. See
Earned Income Limit, later.
| You can choose to include your nontaxable combat pay in earned income when figuring your exclusion or deduction, even if you choose not to include it in earned income for the earned income credit or the credit for child and dependent care expenses.
|
taxmap/pub17/p17-163.htm#en_us_publink1000174427Your employer must give you a Form W-2 (or similar statement) showing in box 10 the total amount of dependent care benefits provided to you during the year under a qualified plan. Your employer will also include any dependent care benefits over $5,000 in your wages shown on your Form W-2 in box 1.
taxmap/pub17/p17-163.htm#en_us_publink1000174428If you exclude dependent care benefits from your income, the amount of the excluded benefits:
- Is not included in your work-related expenses, and
- Reduces the dollar limit, discussed later.
The amount of work-related expenses you use to figure your credit cannot be more than:
- Your earned income for the year if you are single at the end of the year,
or
- The smaller of your or your spouse's earned income for the year if you are married at the end of the
year.
Earned income is defined under
Earned Income Test, earlier.
| For purposes of item (2), use your spouse's earned income for the entire year, even if you were married for only part of the year.
|
taxmap/pub17/p17-163.htm#en_us_publink1000174432If you are legally separated or married and living apart from your spouse (as described under
Joint Return Test, earlier), you are not considered married for purposes of the earned income limit. Use only your income in figuring the earned income limit.
If your spouse died during the year and you file a joint return as a surviving spouse, you may, but are not required to, take into account the earned income of your spouse who died during the year.
taxmap/pub17/p17-163.htm#en_us_publink1000174435You should disregard community property laws when you figure earned income for this credit.
taxmap/pub17/p17-163.htm#en_us_publink1000174436Your spouse who is either a full-time student or not able to care for himself or herself is treated as having earned income. His or her earned income for each month is considered to be at least $250 if there is one qualifying person in your home, or at least $500 if there are two or more.
taxmap/pub17/p17-163.htm#en_us_publink1000174437If your spouse works during that month, use the higher of $250 (or $500) or his or her actual earned income for that month.
taxmap/pub17/p17-163.htm#en_us_publink1000174438
If your spouse is a full-time student or not able to care for himself or herself
for only part of a month, the full $250 (or $500) still applies for that month.
taxmap/pub17/p17-163.htm#en_us_publink1000174439If, in the same month, both you and your spouse are either full-time students or not able to care for yourselves, only one spouse can be considered to have this earned income of $250 (or $500) for that month.
taxmap/pub17/p17-163.htm#en_us_publink1000174440There is a dollar limit on the amount of your work-related expenses you can use to figure the credit. This limit is $3,000 for one qualifying person, or $6,000 for two or more qualifying persons.
| If you paid work-related expenses for the care of two or more qualifying persons, the applicable dollar limit is $6,000. This $6,000 limit does not need to be divided equally among them. For example, if your work-related expenses for the care of one qualifying person are $3,200 and your work-related expenses for another qualifying person are $2,800, you can use the total, $6,000, when figuring the credit.
|
taxmap/pub17/p17-163.htm#en_us_publink1000174442The dollar limit is a yearly limit. The amount of the dollar limit remains the same no matter how long, during the year, you have a qualifying person in your household. Use the $3,000 limit if you paid work-related expenses for the care of one qualifying person at any time during the year. Use $6,000 if you paid work-related expenses for the care of more than one qualifying person at any time during the year.
taxmap/pub17/p17-163.htm#en_us_publink1000174443If you received dependent care benefits that you exclude or deduct from your income, you must subtract that amount from the dollar limit that applies to you. Your reduced dollar limit is figured on Form 2441, Part III. See
Dependent Care Benefits, earlier, for information on excluding or deducting these benefits.
George is a widower with one child and earns $24,000 a year. He pays work-related expenses of $2,900 for the care of his 4-year-old child and qualifies to claim the credit for child and dependent care expenses. His employer pays an additional $1,000 under a dependent care benefit plan. This $1,000 is excluded from George's
income.
Although the dollar limit for his work-related expenses is $3,000 (one qualifying person), George figures his credit on only $2,000 of the $2,900 work-related expenses he paid. This is because his dollar limit is reduced as shown next.
| | George's Reduced Dollar Limit |
| 1) | Maximum allowable expenses for one qualifying person | $3,000 |
| 2) | Minus: Dependent care benefits George excludes from income | −1,000 |
| 3) | Reduced dollar limit on expenses George can use for the credit | $2,000 |
Randall is married and both he and his wife are employed and each has earned income in excess of $6,000. They have two children, Anne and Andy, ages 2 and 4 who attend a daycare facility licensed and regulated by the state. Randall's work-related expenses are $6,000 for the
year.
Randall's employer has a dependent care assistance program as part of its cafeteria plan, which allows employees to make pre-tax contributions to a dependent care flexible spending arrangement. Randall has elected to take the maximum $5,000 exclusion from his salary to cover dependent care expenses through this
program.
Although the dollar limit for his work- related expenses is $6,000 (two or more qualifying persons), Randall figures his credit on only $1,000 of the $6,000 work-related expense paid. This is because his dollar limit is reduced as shown next.
| | Randall's Reduced Dollar Limit |
| 1) | Maximum allowable expenses for two qualifying person | $6,000 |
| 2) | Minus: Dependent care benefits Randall excludes from income | −5,000 |
| 3) | Reduced dollar limit on expenses Randall can use for the
credit | $1,000 |
To determine the amount of your credit, multiply your work-related expenses (after applying the earned income and dollar limits) by a percentage. This percentage depends on your adjusted gross income shown on Form 1040, line 38, or Form 1040A, line 22. The following table shows the percentage to use based on adjusted gross income.
| | IF your adjusted gross income is: | THEN the
percentage is: | |
| | | Over | | But not over | | |
| | | $ 0 | | $15,000 | | 35% | |
| | | 15,000 | | 17,000 | | 34% | |
| | | 17,000 | | 19,000 | | 33% | |
| | | 19,000 | | 21,000 | | 32% | |
| | | 21,000 | | 23,000 | | 31% | |
| | | 23,000 | | 25,000 | | 30% | |
| | | 25,000 | | 27,000 | | 29% | |
| | | 27,000 | | 29,000 | | 28% | |
| | | 29,000 | | 31,000 | | 27% | |
| | | 31,000 | | 33,000 | | 26% | |
| | | 33,000 | | 35,000 | | 25% | |
| | | 35,000 | | 37,000 | | 24% | |
| | | 37,000 | | 39,000 | | 23% | |
| | | 39,000 | | 41,000 | | 22% | |
| | | 41,000 | | 43,000 | | 21% | |
| | | 43,000 | | No limit | | 20% | |
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