How Do I Claim Child Care Expenses on My Taxes

It’s no secret, raising kids costs money. Fortunately, the Child and Dependent Care Credit is a tax perk for eligible parents and guardians paying for child care that can shrink your tax bill or may even result in a refund in some states.

Learning how to get the most out of this credit can turn child care expenses into an opportunity to save money when tax season rolls around.

How Do I Know If I'm Eligible?
The first step is seeing if you qualify for the Child and Dependent Care Credit.

• During the tax year in question, did you pay for care for a dependent child under age 13 (either your biological child, an adopted child, or a child you are financially responsible for)? (Note: If you need to pay for care for an adult dependent, you may also be eligible for the Child and Dependent Care Credit)

• Did you pay for childcare so you could work, look for a job, or go to school?

• Did you, the child, and your spouse (if applicable) live in the U.S. for more than half the year (there are exceptions for military members on duty abroad)?

If you answered “yes” to all three questions, read on because you might be eligible for the Child and Dependent Care Tax Credit!

Documenting Child Care Expenses
Before tax time, keep track of your child care expenses as they come up. That way, when it’s time to file for the credit, you won’t need to dig through your bank statements to find out how much you spent.

Here’s a rundown of what records to keep and tips for tracking your child care expenses:

Collect your care provider’s details. Please review the Form W-10 to see what information may be required fpr your records.

Track all payments. Keep a list of each child care payment, including the date and method of payment. Using checks or electronic transfers can make it easier to maintain and look back, if needed.

Get receipts. After every payment, request a receipt from your provider detailing the service date and fee. Even better - see if your provider sends out an annual summary of your payments at year’s end.

Organize records. Maintain a folder for all your child care receipts or document the details, including each provider’s TIN and address. This practice not only simplifies tracking expenses but also ensures that you have all the necessary documentation at your fingertips.

Tax-Advantaged Child Care Accounts
You can also save on taxes all year long, if your employer offers a Dependent Care Flexible Spending Account (FSA). When you set aside part of your paycheck into this account, you can cover eligible child care costs with money that hasn’t been taxed.

Eligible care expenses can include:

• Summer day camp

• Dependent care services

• Preschool

• Before- and after-school programs

• Child or adult daycare

To get started, talk to your employer about when you can enroll and determine how much to save. The maximum is usually $5,000 yearly for single taxpayers or married couples filing together and $2,500 for married people filing separately.

Don’t forget to spend all the money on eligible child care expenses each year since it typically doesn’t rollover at the end of the plan year.

Filing Requirements for Claiming Child Care Expenses
When you’re claiming child care expenses on your tax return, it’s important to get all the details right for the IRS. The IRS will need the full name, address, and taxpayer identification number (TIN) of your child care provider.

The IRS requires claiming the child and dependent care credit for the same year the services were provided. This means if you paid for eligible child care in 2023, the IRS requires you to claim those expenses on your tax return for 2023, which you’ll file in early 2024.

Use IRS Form 2441 to detail your expenses and attach it to Form 1040. Ensure your expenses qualify under the IRS rules and don’t exceed your income limits. Proper filing can lead to valuable tax savings, so it’s worth getting it right.

Mistakes to Avoid at Tax Time
Keeping these common pitfalls in mind when claiming child and dependent care expenses will help you fully tap into the benefits you may be eligible for:

• Your child doesn’t qualify

• More than one person claimed the child

• Social security number or last name don’t match

• You’re married and filed as single or head of household

• Over or underreporting your income or expenses

Get More Back at Tax Time With WorkMoney
Don’t leave money on the table—get organized, claim what you’re eligible for—keeping track of your child care spending and following IRS rules can help lower your taxes and possibly give you big tax savings when you file.

Get more savings tips with WorkMoney. Join our community for smart tips and strategies to increase your tax refund.