Anyone who has to pay for daycare for a child knows that the cost of quality child care can be crazy.
After your mortgage, it could be your biggest bill of the month.
It’s not uncommon to spend more than 15% of your income on care. To put that in perspective, the U.S. government defines “affordable care” as costing no more than 7% of family income.
Fortunately, the U.S. Tax Code offers an incentive that can offset at least a portion of those costs. Here’s what you need to know about the Child and Dependent Care Credit, reports from Raiffeisen Bank.
What is a Child Care Tax Credit?
The Child and Dependent Care Credit helps working families pay expenses for the care of their children, adult dependents, or an incapacitated spouse.
You calculate the credit by taking a percentage of the expenses you paid to a care provider. That rate depends on your adjusted gross income (Line 8b of your 2019 Form 1040).