News

How can I get a tax break for child care?

Star InactiveStar InactiveStar InactiveStar InactiveStar Inactive
 

Harbour Trust Newsletter: March 2019

Part 4

How can I get a tax break for child care? 

More than 60% of children under age six in the United States have two parents in the workforce.  1Many of these working parents must spend a burdensome share of their earnings on child care, especially if they don't have relatives who are willing and able to help out.

 

The following tax benefits may help you offset some of the costs paid for a nanny, babysitter, day care, preschool, or day camp, but only if the services are used so you can work.

 

Child-care tax credit

Families with one qualifying child (typically age 12 or younger) can claim up to $3,000 per year in child-care expenses; those with two or more qualifying children have a $6,000 annual limit. The credit is worth 20% to 35% of eligible child-care expenses, depending on income. As income rises, the credit amount drops until it hits a minimum of 20% for households with $43,000 or more in adjusted gross income.

For example, families with one qualifying child can receive a credit of $600 to $1,050; those with two or more children can receive a credit of $1,200 to $2,100. A tax credit lowers a family's tax liability dollar for dollar.

Dependent-care flexible spending account (FSA)

Higher-income families may realize a bigger tax benefit from an FSA if it is offered by an employer. Up to $5,000 a year can be set aside to cover eligible child-care costs for qualifying children, and this money is free of federal income tax and Social Security and Medicare taxes. You are not allowed to use pre-tax money from an FSA and take a credit for the same expenses. However, after spending $5,000 from an FSA, you may take a tax credit for up to $1,000 in additional child-care expenses if you have more than one child.

1Child Care Aware® of America, 2017

IMPORTANT DISCLOSURES

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual's personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

This communication is strictly intended for individuals residing in the state(s) of IN. No offers may be made or accepted from any resident outside the specific states referenced.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2019.

Reach Out

Ready to chat about how we can help you?

Latest News

  • 1
  • 2
  • 3
  • 4

Security

As an independent Trust Company we have been granted a charter of operation from the Indiana Department of Financial Institutions...

Read more

Our Location

1024 N Karwick Road
Michigan City, Indiana 46360
Business: 219.877.3500
Toll Free: 888.649.8969
Contact Us