Is Daycare Tax Exempt? 5 Requirements To Claim A Child Care Credit

Ad failed to load

When I talk to my working friends, most of them have the same frustration with one expense each month — daycare costs. I work from home with my daughter so I haven't had to navigate this issue too much, but from what I hear daycare is expensive. Many people employ the low-cost daycare options or use government assistance, but with tax season here, lots of parents are wondering if daycare is tax exempt.

According to Child Care Aware of America, in 2014, the cost of putting two children in daycare was more than the housing costs of homeowners with mortgages in 24 states. Per the same report, in 28 states, the annual cost of keeping an infant in daycare was higher than a year's tuition plus fees for a public university. It's no wonder that so many parents try to find family members to watch their children or become stay-at-home-parents, but for many, daycare is an absolute necessity.

But can it benefit you when it's time to do your taxes? Is daycare considered tax exempt?

Ad failed to load

Not exactly, but there is a federal tax credit that can help you out with your child care expenses. According to Turbo Tax, the child and dependent care credit "refunds" a portion of the money you've spent on child care the previous year. Instead of a tax deduction, it's a tax credit, meaning that it actually reduces your taxes dollar for dollar. For example, if you're eligible for a $1,000 child and dependent care credit, your taxes due will be cut by $1,000. The IRS notes that depending on your adjusted gross income (AGI), the credit can be up to 35 percent of your qualifying expenses.

Regardless of your income, however, you can still claim this credit. A higher income may not get as large of a credit as someone with a lower income, but the credit still applies and can deduct your taxes in some form, notes Turbo Tax.

Ad failed to load

The maximum amount of child care expenses you're allowed to claim for one child is $3,000, and $6,000 for two children. The credit is a percentage of these allowable expenses from 20 to 35 percent depending on your AGI.

You can also use a dependent-care flexible spending account if your employer offers it. This FSA allows you to use pre-tax dollars to pay for childcare expenses up to $5,000 according to Time. You can also claim the credit if you use an FSA, the credit will just apply to the expenses not covered by your account.

No matter how much your child care expenses are or your income, you're eligible for the child and dependent care credit if you meet these five requirements.

Ad failed to load

1Your Spouse Or Co-Parent Can Not Be The Care Provider


If you pay a family member, an in-home daycare, a tax exempt organization like a church, or a traditional childcare facility, you can receive the credit. But you are not eligible if the person you're paying to provide you with child care is your spouse, a parent of the child (such as an ex-husband or ex-wife), anyone listed as a dependent on your return (like a family member you care for or another child), or your own child that is 18 or younger, even if they aren't a dependent on your taxes.

2If You're Married, You Must File Jointly


You can only claim the tax credit if you file your taxes as single, married and filing jointly, head of household, or qualifying widow(er) with a dependent child, per the IRS. If you and your spouse separated during the year, but haven't finalized the divorce, you must file your taxes together if you hope to earn this credit.

3You Must Be Working Or Looking For Work


You can't earn the credit if your child's being cared for and you are not working, looking for work, unable to work per a disability, or a full-time student. This is strictly a credit for those who work in order to alleviate the burden of the expenses and applies to your spouse if you're married.

Ad failed to load

4A Child Must Be 12 Or Younger When Care Was Provided


According to the IRS, the child must have been 12 or younger during the time of care in order for you to receive the credit.

5You Must Have Earned Income


Non-work income, such as profits from an investment, do not count notes Turbo Tax. The IRS makes it clear that you (and your spouse if you are married) must have earned income from wages, salaries, tips, net earnings from self-employment, or other taxable employee compensation.

Ad failed to load
Must Reads

6 Early Signs You're Going To Have A Short Labor, According To Experts

As far as I'm concerned, a short labor is right up there with winning the lottery in terms of lucky life events. (And when I was actually in labor, I would absolutely have traded a bucketful of lottery winnings for a speedier birth.) While some women…
By Kelly Mullen-McWilliams

Kids Will Love These TV Shows & Movies Coming To Netflix In March

You can always count on Netflix to keep it fresh: though there are already so many movies and shows to choose from, every month there's an influx of new content to keep your entire family entertained. As February enters its final weeks, it's time to …
By Megan Walsh

Here Are 10 Ways To Boost Your Baby's Immunity To The Flu

As I'm sure you've read in the thousands upon thousands of articles written about it this winter, the flu is spreading like wildfire and it's bad. Really bad. This strand of flu is the worst we've had in a very long time and it's the most widespread,…
By Abi Berwager Schreier

Khloé Kardashian Asked Twitter About Her Bump, & Moms Totally Delivered

Like her younger sister Kylie Jenner, Khloé Kardashian managed to keep most of her pregnancy a sort-of secret. But unlike Jenner, Kardashian chose to publicly announce her pregnancy several months before the baby's due date. While there's no wrong wa…
By Sophie Hirsh

21 Moms Share The Most Surprising Part About Having A C-Section

Honestly, I don't think we, as a culture, talk about C-sections nearly enough, especially considering so many mothers experience them. And because of a number of factors, the little we do talk about it always seems to be a familiar narrative: "It's n…
By Jamie Kenney

13 Yummy Instant Pot Recipes To Make Under 30 Minutes

An Instant Pot seems to be the must-have appliance in every kitchen these days. If you are anything like me and never knew the beauty of a Instant Pot, you are about to have your life changed. Basically, you put some ingredients into a pot, set the t…
By Kristin Manna

9 Things The First Six Months Of Motherhood Will Teach You About Your Baby

Personally, the first six months of motherhood was a mixed bag. I learned some harsh lessons about myself that made taking care of my baby seem overwhelming. For example, I was clueless, and no amount of research could help me feel like anything but …
By Steph Montgomery

11 Photos You *Must* Take During The Last Days Of Your Pregnancy

During my first pregnancy, I took a photo each week to document my growing belly. I stopped around 36 weeks, though. I hated how I looked in those pictures, and didn't think I'd want to relive those moments. I was wrong. My second pregnancy was a dum…
By Steph Montgomery

6 Red Flags To Definitely Look Out For After Your Baby Falls

The first time my infant son tried to take a few steps, he tumbled and bumped his head on the coffee table. My blood turned to ice in my veins and I froze. There truly isn't anything quite like the feeling a parent gets when their little one gets hur…
By Sarah Bunton

These 9 Instant Pot Recipes Will Make Even The Pickiest Eater Happy At The Table

Like any parent, I've had my share of parenting hits and misses, but one of my favorite "wins" is my daughter's diverse palate. I don't even know if I can take credit for it, but I would like to think I had something to do with her love for lentils, …
By Caroline Shannon-Karasik

Turns Out, Kim Kardashian's Favorite Mom Products Look A Lot Like Your Own Faves

Being a mom is really hard work, especially for the first few months, and Kim Kardashian West is no different in that regard. Now the mother of three, Kardashian says that there are a few products she just can't live without when it comes to raising …
By Abi Berwager Schreier

10 Things No One Tells You About Having A Baby In Your 30s

If you're like me, you evaluate the pros and cons of any major life decision. When my husband and I were considering starting a family, I thought about my career, education, and financial stability. I wanted to know how a pregnancy and childbirth wou…
By Steph Montgomery

Soda Might Hurt Your Fertility, Study Says, & Here's What You Can Do

Who doesn't love sugary drinks? I stopped drinking soda years ago, but I still love gulping down those fancy Starbucks coffee beverages. I don't have a big sweet tooth, but I am a sucker for sugar-sweetened beverages every now-and-then. Turns out, th…
By Annamarya Scaccia

5 Red Flags Your Toddler Isn't Eating Enough

Toddlers are notoriously picky eaters, at least in my experience. You offer mashed potatoes, they want french fries. You give them crackers, they scream for chips. It's frustrating, to be sure, but it's usually their way of vying for independence. It…
By Candace Ganger

35 Moms Share The Most Disgusting Things Their Husbands Do

I'm a human being who revels in challenges. I like when people present me with one, especially if they don't think I can meet or succeed it, and I like taking a challenge on, especially if it's unexpected. So when I aimed to uncover the most disgusti…
By Jamie Kenney

How Having Kids In Your 20s Affects You Later In Life

For parents, like myself, who had kids in their 20s, there are a number of questions that come to mind. When you're deciding what your future will look like, you'll likely consider what this means for your health, career, and more down the line. Thin…
By Tessa Shull

Study: Drinking Two Glasses Of Wine A Day Is Good For Your Mind — Here's Why

There’s more scientific proof that a daily drink or two isn't necessarily a bad thing and could have a place in an overall healthy lifestyle. A new study out of the University of Rochester Medical Center (URMC) in New York found that — in mice, at le…
By Tiffany Thomas

Research Says Eating Carbs Can Lead To A Healthy Pregnancy, So Bring On The Pasta

In the world of me, no food is better than bread. I know it's supposed to be pretty terrible for you, high in calories, low in protein, and full of that modern-day demon, gluten... but guys, it's really yummy. Especially warm out of the oven, when th…
By Jen McGuire

These Photos Of Prince George Then & Now Will Give You Serious Baby Fever

The Duke and Duchess of Cambridge are expecting their third child in Spring 2018. With all of the excitement surrounding the new baby, it's easy to forget all of the good times that have already passed. The couple's eldest is already well into the sc…
By Azure Hall

This Is, Hands Down, The *Grossest* Thing Babies Do Inside The Womb

Your baby's life in the womb may be safe and warm, but it's also kind of grody. Seriously, the whole process of growing into a human being includes more than a few icky moments along the way. But this is the grossest thing babies do inside the womb b…
By Lindsay E. Mack