Please don’t be scared off by the picture, the purpose of this post is to help divorced parents with children put money back in their wallet by taking advantage of the child-care tax credit pursuant to I.R.C. § 21.
The IRS permits individuals to claim as a credit employment-related child care expenses for dependents of the individual.
“Employment-related expenses” may include without limitation: the cost of a babysitter, the cost of a daycare or childcare center, camp (however overnight camp does not qualify), etc.
Through 2012 individuals with one child may claim employment related-expenses up to $3,000.00 as a credit while individuals with 2 or more children ma claim up to $6,000.00 during the taxable year.
Children of divorced parents only qualify for this credit if they satisfy the Qualifying Person Test which basically provides that the child be:
- under the age of 13;
- received over half of their support from one or both parents who are divorced;
- the child was in the custody of one or both parents for more than half the year; and
- The individual is the child’s custodial parent. The custodial parent is the parent with whom the child lived for the greater number of nights in the year. If the child was with each parent for an equal number of nights, the custodial parent is the parent with the higher adjusted gross income.
For further information please see Ten Things to Know About the Child and Dependent Care Credit posted on the IRS website.
Please consult with your family law attorney and accountant when considering how you may take advantage of this child-care credit when negotiating a divorce.
I wish you all the best,
DISCLAIMER: This communication provides general information and does not constitute legal advice. Attorney Advertising. Prior results do not guarantee a similar outcome.