Your client may be able to claim credit for expenses paid to someone to take care of his/her child who is under the age of 13 or for his/her spouse or dependent who is unable to care for himself/herself. To qualify, your client must incur these expenses of having someone else take care of his/her dependent only if this allows him/her to work or to look for work. If your client qualifies, the credit will be 20 - 30% of his/her expenses of up to $2,400 for care expenses of one dependent and up to $4,800 of expenses for two or more dependents depending on his/her income (see chart below.) This credit should not be confused with the Child Tax Credit. To claim credit for child or dependent care, your client must use Form 1040 or Form 1040A to file (not Form 1040EZ) and he/she must meets all of the following requirements:
·Your client incurs the costs in order to be able to earn income. In the case of married couples, both spouses must work full or part-time jobs, with an exception being made for a spouse who is a full-time student or incapacitated.
·Your client pays over half of the household maintenance costs for the individual.
·If married, your client must file jointly.
·Your client hires someone other than his/her child who is under the age of 19, is a dependent of his/her or a spouse.
·Your client has expenses that exceed the amount of tax-free reimbursements he/she may have received from his/her employer for dependent care.
·Your client must report the name, address and taxpayer identification number for the care provider.
Keep in mind, if your client employs help to care for his/her dependent in their home, he/she may be responsible for Social Security (FICA) and unemployment (FUTA) taxes for that employee.
Following is a table of allowable credit percentages per adjusted gross income for 1999:
|Adjusted Gross Income||Credit Percentage|
|$10,000 or less||30%|
|$10,001 - $12,000||29%|
|$12,001 - $14,000||28%|
|$14,001 - $16,000||27%|
|$16,001 - $18,000||26%|
|$18,001 - $20,000||25%|
|$20,001 - $22,000||24%|
|$22,001 - $24,000||23%|
|$24,001 - $26,000||22%|
|$26,001 - $28,000||21%|
|$28,001 and over||20%|