Many Parents Are Unaware of the $8,000 Child Tax Credit

The majority of American families with children are aware of the federal Child Tax Credit, being that parents of over 60 million children got advanced payments last year. But there’s another tax benefit geared to parents that may be less well known than the CTC but that can be far more kind, providing up to $8,000 in tax credits in 2022. 

The Child and Dependent Care Credit isn’t new, it’s been there since the 1970s, and was planned to support working parents to neutralize the daycare expenses, following school programs and summer camps.

But the credit hadn’t kept pace with child care expenses, with the child advocacy group First Five Years Fund noting back in 2018 that it only took into account nearly 10 percent of the usual annual expense of care for 2 kids in the United States during the time.

Under the American Rescue Plan, several tax benefits built up for Americans, including a generous expansion of the Child and Dependent Care Credit. Under the expansion, parents can get a tax credit of $8,000, almost four times the earlier limit of $2,100.

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The expanded Child Tax Credit, in comparison, gives $3,600 per child below the age of 6 and $3,000 for kids between the age of 6 and 17.

Robbin Caruso, co-lead of Prager Metis’ National Tax Controversy Practice “They are recognizing the increasing cost of child care in our country,” adding further “It’s a huge opportunity for taxpayers, and it shouldn’t be missed out on.”

The truth that it’s also completely refundable is vital as it could increase the tax refund that many parents get this year, according to experts. Tax credits are dollar-for-dollar reductions in a person’s tax liability, vs deductions that reduce a person’s overall taxable income. 

That means tax credits such as the Child and Dependent Care Credit are more valuable for taxpayers than deductions and become even more so when they are completely refundable. 

Unaware of the $8,000 Child Tax Credit
Unaware of the $8,000 Child Tax Credit

How Can I Claim $8,000?

The maximum Americans can receive from the tax credit is $8,000, which applies to families with 2 or more children.

The expanded tax break enables families to claim a credit worth 50 percent of their child care costs, which can be up to $16,000 for 2 or more kids. In other terms, families with two kids who spent a minimum of $16,000 on daycare in 2021 can receive $8,000 back from the IRS via the expanded tax credit. 

Before the American Rescue Plan, parents could just claim 35 percent of a maximum of $6,000 in child care costs for 2 children, or utmost tax credit of $2,100. 

Parents with one child can claim 50 percent of their child care costs, up to $8,000. 

Lisa Greene-Lewis, a CPA and tax expert at TurboTax, said about the sweetened Child and Dependent Care Credit that many parents “may not realize how much it’s increased.”

Who Is Eligible?

Parents and people with dependents who spent the care of an eligible individual to work or look for work last year are qualified for the expanded tax credit. 

According to the IRS, an eligible individual can mean a few things:

  • A child below the age of thirteen who is your dependent.
  • A spouse or dependent of any age who can’t look after themselves and lives with you for over 6 months of the year.

The latter is vital as it extends the benefit to people who are taking care of older or adult children with disabilities, and also, taxpayers who claim elderly relatives as dependents and pay for their care. 

Greene-Lewis said, “If you have a child with a disability, there’s no age limit.”

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What Expenses Are Considered Valid?

Because the Child and Dependent Care Credit are aimed at helping working people pay for child care, parents must have spent money on caring for their children or dependents for them to work or look for work. People who pay for care for older dependents can claim expenses such as adult daycare. 

  • The care can be provided inside or outside the home, ranging from nannies to child care centers. But the IRS requires parents to provide the name of the provider as well as their Social Security number or their EIN, as well as check a box to indicate whether they are a household employee. (You can see the form to claim the tax credit here.)
  • Day camps are eligible, but overnight camps don’t qualify since the latter aren’t necessary for a parent to work or to look for work.
  • Before- and after-school programs are also considered eligible because they are considered expenses for child care, the IRS notes. 
  • Care provided by a relative who is not your dependent can qualify as an expense. 

“It can count for summer camp, sports camps — as long as it’s enabling you to work or look to work,” Greene-Lewis noted. 

What Expenses Aren’t Covered?

As with the difference between overnight and day camps, not all kinds of expenses are regarded as valid by the IRS.

If your child goes to attend private school, the tax agency mentions that you can’t claim that as an expense under the Child and Dependent Care Credit as K-12 tuition is regarded as an educational expense, not a child care cost. (However, before- and after-school programs are qualified)

Care won’t be eligible if it’s given by relatives who are dependents or spouses. Usually, the IRS is claiming that you can’t pay your older teenage child to look after a younger child, then claim a tax credit for that. 

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What if I Worked Part-time, Am a Student, or Worked at Home?

According to the IRS, parents need to be working or looking for work to be eligible, but there is wiggle room in some areas.

Work can be either for an employer or yourself in your own business or partnership.


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