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Is Day Care Tax Exempt? 6 Requirements To Claim A Childcare Credit

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While you bask in the sunshine and beauty of spring flowers, don’t forget that it’s also time to do your taxes. When you were single, doing your taxes was a piece of cake, but now that you have kids, you may be confused on how to navigate expenses and exemptions. If you work and need to send your child to day care, for instance, you know how expensive it can get, with a huge chunk of your paycheck going to the costs. But is day care tax exempt?

While day care itself isn’t specifically tax exempt, if you do meet certain requirements, there is a federal child and dependable care tax credit you may be eligible for. It’s called the Child and Dependent Care Credit, and according to the Internal Revenue Service (IRS), its calculation depends on your adjusted gross income and your work-related childcare expenses — up to $3,000 for each child. This credit could be a huge relief for many families, because according to a study by the Economic Policy Institute, the cost of childcare for a 4-year-old is more expensive than the in-state public college tuition in nearly 23 states across the country.

So, if you are hoping to get a childcare tax credit this year, here are six requirements that you need to meet. You can also use the online Am I Eligible to Claim the Child and Dependent Care Credit tool from the IRS website for a more customized answer if needed.

1You Must Have Earned Income

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To claim the Child and Dependent Care tax credit, the IRS noted that you must have earned income in the filing year, and if you are married, your spouse should have earned as well, unless your spouse is a student or disabled.

2Your Child Should Have Been 13 Or Younger

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As mentioned by TurboTax, to qualify for the tax credit, your child should have been under the age of 13 when they received the childcare services in the tax year you are filing for.

3Your Filing Status Matters

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How you are filing will also play a part in whether or not you are eligible for the tax credit. TurboTax explained that to qualify you must file as either single, head of household, qualifying widow or widower with a qualifying child, or married filing jointly. So, for example, if you are married and filing separately, you will not qualify for the exemption.

4Your Childcare/Day Care Had To Be Work Related

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In order to qualify for this tax credit, the IRS explained that you must have either been working or actively looking for work when the childcare costs were incurred. If you are filing jointly with your spouse, the same applies to them.

5Childcare Provider Can’t Be You, Your Spouse, or Your Kids

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As long as the person or institution providing your childcare is not you, your spouse, a parent of the child, a dependent on your tax return, or your own child that is under 19, you can qualify for the tax credit, explained the IRS. If you send your child to day care or a tax exempt institution (like a church), you should fall under the requirements for this tax break.

6Child Must Be In Your Custody

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To qualify for the Child and Dependent Care tax credit, the IRS explained that you must be a the primary caretaker or custodial parent. If you are a divorced, separated, or a noncustodial parent of the child, you can review specific rules to see whether or not you meet the requirements in the Child and Dependent Care Expenses document on the IRS website.

Check out Romper's new video series, Bearing The Motherload, where disagreeing parents from different sides of an issue sit down with a mediator and talk about how to support (and not judge) each other’s parenting perspectives. New episodes air Mondays on Facebook.