Tax Credit for child care expenses

Credit for child care expenses
By George Saenz, CPA • Bankrate.com

Dear Tax Talk:
I have a question about Form 2441, child and dependent care credit. I understand that kindergarten tuition does not qualify, but how about the cost of the transportation to take him or her to the facility where the kindergarten is located? Are these expenses qualified to claim under the child and dependent care credit?

Also, how about if I take my younger child of age 3 to a child nursery; is that expense qualified to claim on Form 2441?


Dear Tax Man,
A working parent or working parents can claim a credit against their tax for child care expenses. Depending on your adjusted gross income, or AGI, the credit can be up to 35 percent of your expenses but must be at least 20 percent regardless of your AGI. Form 2441 is used to report the expenses, the care providers (including their tax identification numbers and addresses) and the amount of the credit.

Child and dependent care expenses must be work-related to qualify for the credit. Expenses are considered work-related only if both of the following are true.
Work-related expenses:
• They allow you (and your spouse if you are married) to work or look for work.
• They are for a qualifying person's care.

You do not have to choose the least expensive way of providing the care. The cost of a paid care provider may be an expense for the care of a qualifying person even if another care provider is available at no cost.

Expenses for care do not include amounts you pay for food, lodging, clothing, education and entertainment. However, you can include small amounts paid for these items if they are incident to and cannot be separated from the cost of caring for the qualifying person.

Expenses for a child in nursery school, preschool or similar programs for children below the level of kindergarten are expenses for care. Expenses to attend kindergarten or a higher grade are not expenses for care (i.e., they are otherwise expected costs of having a child whether you work or not).

If a care provider takes a qualifying person to or from a place where care is provided, that transportation is for the care of the qualifying person. This includes transportation by bus, subway, taxi or private car. However, transportation not provided by a care provider is not for the care of a qualifying person. Also, if you pay the transportation cost for the care provider to come to your home, that expense is not for the care of a qualifying person.