What is the Child and Dependent Care Tax Credit (CDCTC)?
When it’s time to start looking for work or going back to your career (going back to work after maternity leave — or paternity leave — for example), a child care tax credit can come in handy. The Child and Dependent Care Tax Credit only counts the child care expenses you incur while working or looking for a job. With the CDCTC, you can get money back or, at the very least, lower your tax liability.Eligibility for the CDCTC
The Child and Dependent Care Tax Credit is a financial incentive for qualifying working families. This child care tax credit allows taxpayers to receive a certain amount of credit for child care expenses; that amount varies depending on your income.
With an income under $125,000, you’ll receive 50% of the child care expenses you incur annually. Expenses are capped at $8,000 per qualifying child or dependent, and up to $16,000 for two or more qualifying individuals.
For incomes between $125,000 and $183,000, the credit rate declines by one percent for each $2,000 your AGI is above $125,000. At $183,000, the percentage has gone from 50% to 20%.
And with incomes between $183,000 and $400,000, you may receive a 20% credit.
Unlike many other tax credits, the CDCTC’s dollar amounts are the same for all tax filing statuses.
What is the Child Tax Credit (CTC)?
Families with children might also be eligible for a tax break through the Child Tax Credit (different from the CDCTC). To be eligible, your child must be under 18 years of age at the end of the year. The child must be your daughter, son, sister, brother, stepsister, stepbrother, foster child, adopted child, or a relative descendant. The amount you receive is based on your annual income.Can You Claim Both of These Tax Credits?
If you qualify for both credits, then yes, you can claim them both. Beyond the child care tax credit, you may also qualify for other credits or tax subsidies. Consider meeting with a tax professional to ensure you’re taking advantage of everything you’re eligible for.
