Day Care Tax Write Off Question

Question

What exactly does it mean when people say that we can write our Day Care payments off at the end of the year? Do we get money back or something. This is our first year paying for Day Care and I am confused what that means. Can someone explain that to me? I get so confused when it comes to tax stuff.....Thanks!

Answer 1

Day care expenses qualify for a credit on on the federal income tax return.

You can get a credit of between 20%-30% on up to $3000 if you have one kid in daycare or $6000 if you have two or more in daycare.

Generally, one child will get you a $600-$900 credit and two or more kids will get you a $1200-$1800 credit.

You don't get all of your expenses back but it is better than nothing.

Answer 2

You can Deduct the amount of payments for daycare receiving a credit for the amount you paid for childcare

Answer 3

Get out a 1040.  Look at the back.  There's a line for form 2441 in the credit section. The amount spent on day care is entered on that form.

Here's the rub.  If the parents live together, both parents must work (or be in school) to be eligible for the credit.

The credit is a based on how much you paid, the amount considered (like $6000 for 2 children), but is also limited to the amount of income the lowest-paid parent has.  THEN the amount is multiplied by a factor.  The higher your AGI, the lower the factor.

The credit is used to reduce income tax.  If your taxable income is already zero, it's worthless.  If you owe income tax, it reduces it, but not below zero.  For some taxpayers, the child tax credit reduces the amount of child tax credit they get, but in turn may increase the amount of additional child tax credit....