Your credit is a percentage of your work-related expenses. Your expenses are subject to the earned income limit and the dollar limit. The percentage is based on your adjusted gross income. taxmap/pubs/p503-001.htm#en_us_publink1000203336
To figure the credit for 2009 work-related expenses, count only those you paid by December 31, 2009. taxmap/pubs/p503-001.htm#en_us_publink1000203337
If you pay for services before they are provided, you can count the prepaid expenses only in the year the care is received. Claim the expenses for the later year as if they were actually paid in that later year. taxmap/pubs/p503-001.htm#en_us_publink1000203338
Do not count 2008 expenses that you paid in 2009 as work-related expenses for 2009. You may be able to claim an additional credit for them on your 2009 return, but you must figure it separately. See Payments for prior year's expenses
under Amount of Credit,
If you had expenses in 2009 that you did not pay until 2010, you cannot count them when figuring your 2009 credit. You may be able to claim a credit for them on your 2010 return.
If a state social services agency pays you a nontaxable amount to reimburse you for some of your child and dependent care expenses, you cannot count the expenses that are reimbursed as work-related expenses.taxmap/pubs/p503-001.htm#en_us_publink1000203341
You paid work-related expenses of $3,000. You are reimbursed $2,000 by a state social services agency. You can use only $1,000 to figure your credit. taxmap/pubs/p503-001.htm#en_us_publink1000203342
Some expenses for the care of qualifying persons who are not able to care for themselves may qualify as work-related expenses and also as medical expenses. You can use them either way, but you cannot use the same expenses to claim both a credit and a medical expense deduction.
If you use these expenses to figure the credit and they are more than the earned income limit or the dollar limit, discussed later, you can add the excess to your medical expenses. However, if you use your total expenses to figure your medical expense deduction, you cannot use any part of them to figure your credit. For information on medical expenses, see Publication 502, Medical and Dental Expenses.
Amounts excluded from your income under your employer's dependent care benefits plan cannot be used to claim a medical expense deduction.
If you receive dependent care benefits, your dollar limit for purposes of the credit may be reduced. See Reduced Dollar Limit,
later. But, even if you cannot take the credit, you may be able to take an exclusion or deduction for the dependent care benefits.
Dependent care benefits include:
- Amounts your employer paid directly to either you or your care provider for the care of your qualifying person while you work,
- The fair market value of care in a daycare facility provided or sponsored by your employer, and
- Pre-tax contributions you made under a dependent care flexible spending arrangement.
Your salary may have been reduced to pay for these benefits. If you received benefits as an employee, they should be shown in box 10 of your Form W-2, Wage and Tax Statement. See Statement for employee,
later. Benefits you received as a partner should be shown in box 13 of your Schedule K-1 (Form 1065) with code O.
Enter the amount of these benefits on Form 2441, line 14.taxmap/pubs/p503-001.htm#en_us_publink1000203346
If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. Your employer can tell you whether your benefit plan qualifies. To claim the exclusion, you must complete Part III of Form 2441. You cannot use Form 1040EZ.
If you are self-employed and receive benefits from a qualified dependent care benefit plan, you are treated as both employer and employee. Therefore, you would not get an exclusion from wages. Instead, you would get a deduction on Form 1040, Schedule C, line 14; Schedule E, line 18 or 28; or Schedule F, line 17. To claim the deduction, you must use Form 2441.
The amount you can exclude or deduct is limited to the smallest of:
- The total amount of dependent care benefits you received during the year,
- The total amount of qualified expenses you incurred during the year,
- Your earned income,
- Your spouse's earned income, or
- $5,000 ($2,500 if married filing separately).
The definition of earned income for the exclusion or deduction is the same as the definition used when figuring the credit except that:
- Earned income for the exclusion or deduction does not include any dependent care benefits you receive, and
- You can elect to include nontaxable combat pay in earned income for the exclusion or deduction even if you did not choose to include it in earned income for the credit for child and dependent care expenses or the earned income credit.
Your employer must give you a Form W-2 (or similar statement), showing in box 10 the total amount of dependent care benefits provided to you during the year under a qualified plan. Your employer will also include any dependent care benefits over $5,000 in your wages shown on your Form W-2 in box 1.taxmap/pubs/p503-001.htm#en_us_publink1000203349
If you exclude dependent care benefits from your income, the amount of the excluded benefits:
- Is not included in your work-related expenses, and
- Reduces the dollar limit, discussed later.
The amount of work-related expenses you use to figure your credit cannot be more than:
- Your earned income for the year, if you are single at the end of the year, or
- The smaller of your or your spouse's earned income for the year, if you are married at the end of the year.
Earned income for the purposes of figuring the credit is defined under Earned Income Test,
For purposes of item (2), use your spouse's earned income for the entire year, even if you were married for only part of the year.
You remarried on December 3. Your earned income for the year was $18,000. Your new spouse's earned income for the year was $2,000. You paid work-related expenses of $3,000 for the care of your 5-year-old child and qualified to claim the credit. The amount of expenses you use to figure your credit cannot be more than $2,000 (the smaller of your earned income or that of your spouse).taxmap/pubs/p503-001.htm#en_us_publink1000203353
If you are legally separated or married and living apart from your spouse (as described under Joint Return Test,
earlier), you are not considered married for purposes of the earned income limit. Use only your income in figuring the earned income limit.
If your spouse died during the year and you file a joint return as a surviving spouse, you are not considered married for purposes of the earned income limit. Use only your income in figuring the earned income limit. taxmap/pubs/p503-001.htm#en_us_publink1000203355
Disregard community property laws when you figure earned income for this credit. taxmap/pubs/p503-001.htm#en_us_publink1000203356
If you are self-employed, include your net earnings in earned income. For purposes of the child and dependent care credit, net earnings from self-employment generally means the amount from Schedule SE (either Section A or Section B), line 3, minus any deduction for self-employment tax on Form 1040, line 27. Include your self-employment earnings in earned income, even if they are less than $400 and you did not file Schedule SE. taxmap/pubs/p503-001.htm#en_us_publink1000203357
If you are a member of the clergy or a church employee, see the instructions for Form 2441 for details.taxmap/pubs/p503-001.htm#en_us_publink1000203358
If you filed Schedule C or C-EZ to report income as a statutory employee, also include as earned income the amount from line 1 of that Schedule C or C-EZ. taxmap/pubs/p503-001.htm#en_us_publink1000203359
You must reduce your earned income by any net loss from self-employment. taxmap/pubs/p503-001.htm#en_us_publink1000203360
If your net earnings from self-employment are low or you have a net loss, you may be able to figure your net earnings by using an optional method instead of the regular method. Get Publication 334, Tax Guide for Small Business, for details. If you use an optional method to figure net earnings for self-employment tax purposes, include those net earnings in your earned income for this credit. In this case, subtract any deduction you claimed on Form 1040, line 27, from the total of the amounts on Schedule SE, Section B, lines 3 and 4b, to figure your net earnings. taxmap/pubs/p503-001.htm#en_us_publink1000203361
Your spouse who is either a full-time student or not able to care for himself or herself is treated as having earned income. His or her earned income for each month is considered to be at least $250 if there is one qualifying person in your home, or at least $500 if there are two or more. taxmap/pubs/p503-001.htm#en_us_publink1000203362
If your spouse works during that month, use the higher of $250 (or $500) or his or her actual earned income for that month. taxmap/pubs/p503-001.htm#en_us_publink1000203363
If your spouse is a full-time student or not able to care for himself or herself for only part of a month, the full $250 (or $500) still applies for that month. taxmap/pubs/p503-001.htm#en_us_publink1000203364
If, in the same month, both you and your spouse are either full-time students or not able to care for yourselves, only one spouse can be considered to have this earned income of $250 (or $500) for that month. taxmap/pubs/p503-001.htm#en_us_publink1000203365
Jim works and keeps up a home for himself and his wife Sharon. Because of an accident, Sharon is not able to care for herself for 11 months during the tax year.
During the 11 months, Jim pays $3,300 of work-related expenses for Sharon's care. These expenses also qualify as medical expenses. Their adjusted gross income is $29,000 and the entire amount is Jim's earned income.
Jim and Sharon's earned income limit is the smallest of the following amounts.
| ||Jim and Sharon's Earned Income Limit|| |
|1)||Work-related expenses Jim paid||$|| ||3,300|| |
|2)||Jim's earned income||$|| ||29,000|| |
|3)||Income considered earned by Sharon|
(11 × $250)
|$|| || |
Jim and Sharon can use $2,750 to figure the credit and treat the balance of $550 ($3,300 − $2,750) as a medical expense. However, if they use the $3,300 first as a medical expense, they cannot use any part of that amount to figure the credit.
There is a dollar limit on the amount of your work-related expenses you can use to figure the credit. This limit is $3,000 for one qualifying person, or $6,000 for two or more qualifying persons.
If you paid work-related expenses for the care of two or more qualifying persons, the $6,000 limit does not need to be divided equally among them. For example, if your work-related expenses for the care of one qualifying person are $3,200 and your work-related expenses for another qualifying person are $2,800, you can use the total, $6,000, when figuring the credit.
The dollar limit is a yearly limit. The amount of the dollar limit remains the same no matter how long, during the year, you have a qualifying person in your household. Use the $3,000 limit if you paid work-related expenses for the care of one qualifying person at any time during the year. Use $6,000 if you paid work-related expenses for the care of more than one qualifying person at any time during the year. taxmap/pubs/p503-001.htm#en_us_publink1000203370
You pay $500 a month for after-school care for your son. He turned 13 on May 1 and is no longer a qualifying person. You can use the $2,000 of expenses for his care January through April to figure your credit because it is not more than the $3,000 yearly limit.taxmap/pubs/p503-001.htm#en_us_publink1000203371
In July of this year, to permit your spouse to begin a new job, you enrolled your 3-year-old daughter in a nursery school that provides preschool childcare. You paid $300 per month for the childcare. You can use the full $1,800 you paid ($300 × 6 months) as qualified expenses because it is not more than the $3,000 yearly limit. taxmap/pubs/p503-001.htm#en_us_publink1000203372
If you received dependent care benefits that you exclude or deduct from your income, you must subtract that amount from the dollar limit that applies to you. Your reduced dollar limit is figured in Part III of Form 2441. See Dependent Care Benefits,
earlier, for information on excluding or deducting these benefits.
George is a widower with one child and earns $24,000 a year. He pays work-related expenses of $2,900 for the care of his 4-year-old child and qualifies to claim the credit for child and dependent care expenses. His employer pays an additional $1,000 under a qualified dependent care benefit plan. This $1,000 is excluded from George's income.
Although the dollar limit for his work-related expenses is $3,000 (one qualifying person), George figures his credit on only $2,000 of the $2,900 work-related expenses he paid. This is because his dollar limit is reduced as shown next.
| ||George's Reduced Dollar Limit|
| 1)||Maximum allowable expenses for one|
| 2)||Minus: Dependent care benefits George|
excludes from income
| −1,000 |
| 3)||Reduced dollar limit on expenses George|
can use for the credit
| $2,000 |taxmap/pubs/p503-001.htm#en_us_publink1000203378
To determine the amount of your credit, multiply your work-related expenses (after applying the earned income and dollar limits) by a percentage. This percentage depends on your adjusted gross income shown on Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 36. The following table shows the percentage to use based on adjusted gross income.
| || IF your adjusted gross income is: || THEN the || |
| || || Over: || || || || But not over: || || percentage is: || |
| || ||$ 0|| ||—|| ||$15,000|| ||35%|| |
| || ||15,000|| ||—|| ||17,000|| ||34%|| |
| || ||17,000|| ||—|| ||19,000|| ||33%|| |
| || ||19,000|| ||—|| ||21,000|| ||32%|| |
| || ||21,000|| ||—|| ||23,000|| ||31%|| |
| || ||23,000|| ||—|| ||25,000|| ||30%|| |
| || ||25,000|| ||—|| ||27,000|| ||29%|| |
| || ||27,000|| ||—|| ||29,000|| ||28%|| |
| || ||29,000|| ||—|| ||31,000|| ||27%|| |
| || ||31,000|| ||—|| ||33,000|| ||26%|| |
| || ||33,000|| ||—|| ||35,000|| ||25%|| |
| || ||35,000|| ||—|| ||37,000|| ||24%|| |
| || ||37,000|| ||—|| ||39,000|| ||23%|| |
| || ||39,000|| ||—|| ||41,000|| ||22%|| |
| || ||41,000|| ||—|| ||43,000|| ||21%|| |
| || ||43,000|| ||—|| ||No limit|| ||20%|| |
If you had work-related expenses in 2008 that you paid in 2009, you may be able to increase the credit on your 2009 return. Attach a statement to your form showing how you figured the additional amount from 2008. Then enter "CPYE" (Credit for Prior Year Expenses) and the amount of the credit on the dotted line next to line 9 on Form 2441. Also enter the name and taxpayer identification number of the person for whom you paid the prior year's expenses. Then add this credit to the amount on line 9, and replace the amount on line 9 with the total. See Worksheet A, later.taxmap/pubs/p503-001.htm#en_us_publink1000203379
In 2008, Sam and Kate had childcare expenses of $2,600 for their 12-year-old child. Of the $2,600, they paid $2,000 in 2008 and $600 in 2009. Their adjusted gross income for 2008 was $30,000. Sam's earned income of $14,000 was less than Kate's earned income. A credit for their 2008 expenses paid in 2009 is not allowed in 2008. It is allowed for the 2009 tax year, but they must use their adjusted gross income for 2008 to compute the amount. The worksheet they used to figure this credit is shown later.
Sam and Kate add the $162 from line 13 of this worksheet to their 2009 credit and enter the total on their Form 2441, line 9. They enter "CPYE $162" and their child's name and SSN in the space to the left of line 9.