How to Use Form 2441 to Claim Child and Dependent Care Credit

If  you paid someone to take care your child or a qualifying person so that you can work or look for work, you may be able to claim child and dependent care credit.

Step 1: Determine whether you are qualified to claim child and dependent care credit.

You must meet all the tests below in order to claim child and dependent care credit.

1. The care must be for one or more qualifying persons (see definition below).

2.  You (and your spouse if filing jointly) must have earned income during the year. (Your spouse is treated as having $250 per month earned income for any month that he or she is a full time student or unable to care for himself or herself.)

3. You pay the care expenses so that you can work or look for work.

4. You can't make the payment to your dependent, your spouse, the parent of your child under age 13 or your child under the age of 19.

5. Your filing status may be single, head of household, qualifying widow(er) or married filing jointly. (If you are legally separated or living apart from your spouse, see Joint Return Test section of IRS publication 503 to determine if you meet this test.)

6. You must provide the care provider's name, address and tax identification number on your return.

Definition of qualifying persons per IRS Publication 503

A qualifying person is:

1. Your qualifying child who is your dependent and who was under age 13 when the care was provided. (For child of divorced or separated parents or parents living apart, if you cannot claim your child as a dependent, see Publication 503 to determine if you can treat your child as your qualifying person.)

2. Your spouse who was not physically or mentally able to care for himself or herself and lived with you for more than half the year.

3. A person who was not physically or mentally able to care for himself or herself, lived with you for more than half the year, and either:

a. Was your dependent, or

b. Would have been your dependent except that:

i. He or she received gross income of $4,000 or more,

ii. He or she filed a joint return, or

iii. You, or your spouse if filing jointly, could be claimed as a dependent on someone else's return.

Step 2: Collect information for claiming the credit.

1. Document of your care expenses, such as receipts, invoices and credit card statements.

2. Provider's name, address and tax identification number.

3. Form W-2. If you received dependent care benefits, such as pre-tax contributions to a dependent care flexible spending account,  they should be reported in box 10 of Form W-2.

Step 3: Figure the amount of credit you can claim.

Complete Form 2441 to figure the amount of credit you can claim. See the example below on how to complete Form 2441.

Note: This example is for tax year 2015. Since there is no change for 2016's Form 2441, you can still use this example as your reference to prepare 2016's Form 2441.

Example: Sam and Amy are married with two kids, Alex and Kate. In 2015,

They paid $12,000 to ABC Daycare for Alex.

Sam's earned income is $100,000.

Amy's earned income is $10,000.

Sam made $5,000 pre-tax contribution to the dependent care flexible spending account (FSA) offered by his employer.

Click here to see the completed Form 2441 for Sam and Amy.

Here are a few points you may want to pay attention to:

1. The $7,000 on line 2 is $12,000 paid to ABC Daycare minus $5,000 pre-tax contribution to dependent care flexible spending account (FSA).

2. The dollar limit for child and dependent care expenses is $3,000 for one and $6,000 for two or more qualifying persons. If you paid $0 for one of your qualifying persons, you should still list him/her on line 2, so that you can use $6,000 to computer your credit.

3. The amount on line 10 is your tax liability on Form 1040, line 47 (Form 1040A, line 30, or Form 1040NR, line 45) reduced by the foreign tax credit on Form 1040, line 48 (Form 1040NR, line 46, or 0 if you file Form 1040A).

4. If you received dependent care benefits that reported in box 10 of your W-2 form, you must complete Part III to exclude the benefit from your taxable income.

Step 4: Claim the child and dependent care credit on your tax return.

Enter the credit you figured on the following tax line and attach Form 2441 with your tax return to claim the child and dependent care credit.

Form 1040, line 49 or,

Form 1040A, line 31 or,

Form 1040NR, line 47.

For more information, please see IRS Publication 503.

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