Child Care Finders - All you need to know about child care. » dependent care tax http://childcarefinders.org Guide to child care needs and informations Thu, 28 Apr 2011 00:32:14 +0000 http://wordpress.org/?v=2.9.1 en hourly 1 Benefits Of A Dependent Care Flexible Spending Account http://childcarefinders.org/benefits-of-a-dependent-care-flexible-spending-account.htm http://childcarefinders.org/benefits-of-a-dependent-care-flexible-spending-account.htm#comments Thu, 23 Jul 2009 19:05:24 +0000 Dr. Smith http://childcarefinders.org/?p=227 With millions of dollars going towards childcare every year, it is vital to take advantage of every program that offers some kind of relief to working parents and helps them find cheap child care. The Dependent Care Flexible Spending Account (DCFSA) is one such opportunity that would help you soften the blow of your childcare expenses.

Dependent Day Care Flexible Spending Account Benefits

Working parents know how expensive it can be to provide quality childcare for their kids. A dependent day care flexible spending account, or more commonly known as the ‘cafeteria plan’, is an employer sponsored account which allows you to set aside portions of your income in the form of pre-tax dollars and use them for your childcare expenses. Over 90% of employers offer these dependent care FSA programs now and it is up to you to decide how much you would like to set aside each month. The dependent care flexible spending account can be used for daycares, babysitters, summer camps, nurseries or any other childcare related expenses. The dependent care flexible account helps you reduce your total dependent care expenses as you would end up spending much more if you paid for these services with after-tax dollars.

FSA Eligible Items: How It Works

The dependent care flexible spending account is a completely voluntary plan. If your employer offers this plan then you must determine if it is beneficial for you and how to make it work for you. In order to determine FSA eligible expenses, your child must be under the age of 13 or you must be caring for a dependent unable of self-care. The dependent care flexible spending account benefit can be claimed if you and your spouse are both working while you pay someone else to take care of your children. The dependent care FSA allows you to set aside up to $5000 every year. The amount you choose is deducted from your payroll and put into a separate account. After claiming tax-free reimbursement as FSA eligible items or expenses, this amount can be used to pay for child care needs. The dependent care flexible spending account allows you to reduce your income taxes and thus increase your take-home pay.

Comparing DCFSA to Dependent Care Tax Credit

The federal government allows several programs to help working parents with childcare expenses. These programs are designed keeping various types of families in mind. You must determine which plan works better for you based on your income and needs. The dependent care flexible spending account (DCFSA) is employer sponsored and the dependent care FSA benefits are seen in the form of payroll deductions from pretax dollars. The Dependent Care tax credit, on the other hand, allows a dollar-for-dollar credit on your income tax owed. However, reimbursements are not allowed, thus it proves to be more beneficial for higher income families. It must be kept in mind that only one of these programs can be used at a time so it is essential to choose wisely.

The Dependent Care Flexible Spending Account is very useful for working parents with little children to care for. The financial burden of childcare expenses can be greatly reduced by participating in the dependent care FSA and claiming FSA eligible expenses.

References:

  1. Dependent Care Flexible Spending Account (DCFSA) – FSA Feds
]]> http://childcarefinders.org/benefits-of-a-dependent-care-flexible-spending-account.htm/feed 0 Save By Claiming Child And Dependent Care Tax Credit http://childcarefinders.org/save-by-claiming-child-and-dependent-care-tax-credit.htm http://childcarefinders.org/save-by-claiming-child-and-dependent-care-tax-credit.htm#comments Tue, 21 Jul 2009 19:24:04 +0000 Dr. Smith http://childcarefinders.org/?p=216 Providing dependent care for your children can prove to be exceedingly financially burdensome for you. While expenses for child care seem to keep rising, it is important to explore other options to reduce costs. For this purpose, there is a government program known as the Dependent Care Tax Credit which provides you with certain child care financial benefits and is designed to help you reduce your taxes considerably while caring for a child.

What Is The Child And Dependent Care Tax Credit?

The federal government recognizes the immense expenditure incurred by you while caring for your children. In order to provide you with some sort of relief it has designed the Child and Dependent Care Tax Credit program. If you have been paying for daycare expenses, this program lets you claim a child tax credit of up to $3000 for one child and up to $6000 for two or more children. This child tax credit is given for up to 35% of the expenses incurred in childcare depending on your income. Thus, even without having to reduce your daycare expenditure, the dependent care tax credit provides you with a considerable amount of financial relief and is found to be a particularly useful child care resource for single parents.

Qualifying For And Claiming Child Tax Credit

Like most tax benefits, claiming child tax credit also requires individuals to possess some basic qualification factors. The dependent care tax credit is given to hard-working individuals who spend money regularly on daycares, nurseries and even daytime summer camps for their children.

  • If you have a child under the age of 13 or a dependent of any age who is unable to care for themselves then you may be eligible to qualify for the child and dependent care tax credit.
  • In claiming child tax credit, you must however be paying more than 50% of your household costs for your dependent.
  • Furthermore, you must hire someone other than your dependent to care for your child. Your childcare provider needs to provide you with their name, address and social security number which you can fill out in the form while claiming the tax credit.

While the child tax credit qualification rules of the IRS are fairly transparent, it is essential that you abide by them in order to lawfully claim your dependent care tax credit.

How To Claim Your Child Tax Benefit Credit?

Claiming child tax benefit credit is fairly simple and may be highly beneficial to you and your family. If you are unsure of how to go about claiming child tax credit, it is advisable to consult a qualified tax professional or accountant to help you file your claim for dependent care tax credit.

  • While filing for your tax returns, simply fill out Form 1040, 1040A or 1040NR, whichever is applicable.
  • Full details regarding this child and dependent care tax credit claim can be found on the IRS government website under Publication 503 (1). It describes in detail everything you would need to know regarding the child and dependent care tax credit claims.
  • It must be kept in mind that this child tax benefit credit does not benefit lower income families too much as child tax credit is not refundable. If you do not pay taxes or your taxes are lower than your claim you will not be reimbursed for the dependent care tax credit. It is advantageous for families with income over $24000 a year.

The Child and Dependent Care Tax Credit is a very favorable program designed by the federal government to assist working individuals in caring for their children. It not only helps save money but also helps parents provide quality child care for their children by using the child tax benefit credit.

References
(1) Publication 503: Internal Revenue Service

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