The credit for children of divorced or separated parents covers for their expenses under certain conditions.
Tax Credit For Children -Qualifications
Your child qualifies for this credit, if you are divorced or legally separated under a written separation agreement, and you have custody of your child for more days in the year than the other parent does.
In order to qualify for this tax credit for children, you must meet the following criteria (a-g):
- The child must be under 13 years old or unable to take care of himself.
- The child must be in the custody of one or both of the parents for more than half the year.
- One or both of the parents must provide more than half of the child’s support during the year.
- You must to file a joint return if you are married.
- If you are legally separated, you can file for the Child Care Credit. Your credit may be claimed on a separate return.
- If you are still married and prefer to file a separate return, you may qualify if:
- You share the home with the qualifying person for more than half the tax year.
- You pay the cost of living for more than six months.
- Your spouse does not live more than 6 months in your home.
- You can pay someone other than your spouse or a person you can claim as a dependent for the child’s care. You can claim payments made to relatives who are not your dependents. This rule applies even if they live in your home.
Work Related Expenses
In addition, to be eligible for this tax credit for children, you must show evidence of work related expenses.
Home expenses include the cost of ordinary service to maintain the well-being and protection of the qualifying person. The costs for food, clothing, education, chauffeur and gardener are not included. Child care expenses may include nursery school or day care for preschool children or summer camp. The law excludes overnight camp expenses. If the nursery school provides food or clothing as part of its service, it is considered child care expense.
You may receive tax credit for children if the expenditures for out of home, non-institutional care, if your disabled spouse or your dependent regularly spends at least 8 hours a day in your home.
In addition, you can claim on your tax returns the cost of food, lodging (including rent and utility expenses) for your dependent or your child housekeeper.
Plan Your Tax Claim To Your Advantage
This tax credit for children allows you to plan your tax claim to your advantage, if certain conditions are met. For instance, if you have an elderly parent and you provide him money for food, this may result in a tax liability gift. If your parent is taking care of your child, you may also receive an income tax credit, avoiding in this way a potential gift tax penalty. If while babysitting, you provide him food, you will receive a tax credit for the cost of meals. This amount is not income taxable for your parent.
To figure your tax credit for children you may have to take into consideration the current limits on the amount of work related expenses. These are the earned income limit and the dollar limit.
Earned Income Limit
To qualify for a childcare credit, if you are single, your work related expenses must not be more than the earned income at the end of the tax year.
If you are married, your work related expenses should not be more than your or your spouse’s earned income, whichever is less.
Additionally, if you are married and your spouse is a student or she is unable to take care of herself, she is considered to have an income of $200 a month (for only one qualifying person).
If there are two or more qualifying persons in your home, the amount of income they are considered to have is $400. In this case, along with a dependent childcare, your disabled spouse may qualify for this credit. The credit is limited to one spouse for any one month.
Tax Credit Child Care Expenses Limit
There is a limit for the work related expenses of $3,000 for one child or $6,000 for two or more. In order to get a maximum credit, you need to use the smaller earned income of your own or your spouse’s.
