Can Daycare Be Deducted From Taxes?

We understand how important it is for parents to get the tax breaks they need, so they can save money for their families. That is why we’ve decided to answer this big question that many parents are asking: Can daycare be deducted from taxes? To help us find the answer, we’ve teamed up with Brent Halliday, Certified Public Accountant (CPA) from Halliday & Company in East Millcreek. Together, we will answer that question and a few others, so that you can have the information available to you when you fill out your taxes.

Can You Deduct Childcare When Filling Out Taxes?

Yes! This may sound obvious to some, but about 20 percent of people forget to include their childcare expenses on their taxes. If your child has been enrolled in daycare during the last year, make sure to remember to include it in your deductions.

Remember This! If your employer offers a dependent care benefits plan, such as a Flexible Spending Account (FSA), consider taking advantage of that. You can contribute up to $5,000 of your annual income to an FSA account pretax, that can then be used towards childcare expenses! Any unused benefit is then simply treated as income on your tax return.

Can Tax Payers of All Incomes Qualify for This Credit?

family of four

Irrespective of how much you make, your ability to qualify doesn’t go away or phase out. In fact, you could make a million dollars and still be able to take this credit.

Which Form Do You Need to Fill Out?

You’ll need to fill out Form 2441 on your taxes. This is the Child and Dependent Care Expenses form where you’ll need to provide the name, address, and federal tax ID number of your child’s daycare. You can find out the federal tax ID number by talking with your childcare provider. If your child attends My Childcare Academy, for example, all you need to do is call and verify that your child has been enrolled with us and we are happy to provide that ID number for you!

How Much of Your Childcare Costs Can Be Deducted?

two toddlers at daycare
You can deduct up to 35 percent per child’s daycare cost. Check out what TurboTax has to say about deducting childcare costs:

“If you paid a daycare center, babysitter, summer camp, or other care provider to care for a qualifying child under age 13 or a disabled dependent of any age, you may qualify for a tax credit of up to 35 percent of qualifying expenses of $3,000 for one child or dependent, or up to $6,000 for two or more children or dependents.”

On this, Brent Halliday reminds us that while this 35 percent is true, the amount you claim in daycare costs can’t exceed your income amount.

Why Does the Government Allow for Child and Dependent Care Credit?

The purpose of this credit is to give a break to those single or double-parent families who must work to provide ends meat. After all, when parents must work to provide for their families, childcare can become a huge burden to bear. Allowing this credit encourages people to work while still providing for their children’s needs during the day.

Can Students with Children in Daycare Apply for This Credit?

young mom graduate with baby

Certainly! Daycare credit is not just for working parents and can be used by those attending school. If you go to school full-time, you’re allowed a wage amount for each month you’re in school. That amount is typically $250 per child per month and does not factor into your income amount due to the fact that the government sees you as having earned income for each month you’ve been enrolled in school.

Ready to Claim Your Tax Credit?

Before filling out your taxes, don’t forget to ask your childcare provider for their federal tax ID number. Remember, you have the right to file Form 2441 and claim up to 35 percent of childcare expenses per child. We hope this information was helpful and that you can use this tax credit benefit as an opportunity to continue pursuing your career and family goals.

Are you a My Childcare Academy parent?
Call (801) 679-0627 to ask what our federal tax ID number is.

Categories: daycare
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