The Working Families Tax Relief Act of 2004 (18) made three important changes to the child and dependent care credit effective for tax years beginning in 2005: (1) The definition of a qualifying dependent is conformed to that of the uniform definition of a child, thereby requiring the individual to have the same principal place of abode as the taxpayer for more than half of the tax year; (19) (2) the taxpayer claiming the credit need not "maintain" the household; and (3) an individual who is physically or mentally incapable of caring for himself or herself must live with the taxpayer for more than half of the tax year in order to qualify.
As long as J's mother is not her dependent, the amounts paid qualify for the child and dependent care credit. If J's mother is her dependent, the amounts do not qualify.
Not all of the recommendations made by those who reviewed the proposed regulations were implemented, and some questions about specific provisions of the child and dependent care credit remain unanswered.
Provide that certain government benefits (food stamps, Section VIII housing subsidy, payments under the Temporary Assistance to Needy Families program, child's social security benefits) do not "count against" the custodial parent in determining "expanded support" for purposes of the dependency exemption, HOH, and the child and dependent care credit.
Repeal the Child Tax Credit (IRC [sections] 24); replace it by increasing the amount of the dependency exemption and expanding the child and dependent care credit.
To compute the child and dependent care credit, simply multiply the qualifying expenses (subject to the limitations as discussed above) by the appropriate credit rate.
T's child and dependent care credit for the tax year is $483 ($2,100 x 23%).
* The WFTRA provides one definition of a "child" with variations, to be used for the dependency exemption, HOH filing status, the EIC, the child credit and the
child and dependent care credit.
Determining who gets the CTC when the parents are divorced is different than determining the
child and dependent care credit when the parents are divorced.
In addition, he has an $850 regular tax liability, an $800 Social Security tax, a $250
child and dependent care credit and a $1,000 EIC.
Currently the only relief to taxpayers with a number of children comes from the
child and dependent care credit. This credit allows individuals to claim a tax credit for qualifying household and dependent care expenses incurred for the care of a qualifying individual.
Taxpayers with disabled dependents may elect to use certain expenses as either deductible medical expenses, or as qualifying payments for the
child and dependent care credit, whichever is most beneficial.
