If you incurred dependent care costs for someone to care for a child under age 13 or a qualifying spouse or dependent so you could work or look for work, can reduce your tax liabilities by claiming the Child and Dependent Care Credit on your federal income tax return. To qualify, your spouse, children age 13 or older, and other dependents must be physically or mentally incapable of self-care.
The credit is a percentage of the amount of work-related child and dependent care expenses you paid to a care provider. The credit can be up to 35 percent of your qualifying expenses, depending upon your income.
For 2007, you may use up to $3,000 of the expenses paid in a year for one qualifying individual, or $6,000 for two or more qualifying individuals. These dollar limits must be reduced by the amount of any dependent care benefits provided by your employer that you exclude from your income.
To claim the credit for child and dependent care expenses, you must meet certain conditions including:
Income – You must have earned income from wages, salaries, tips, or other taxable employee compensation, or net earnings from self-employment (one spouse may be considered as having earned income if they were a full-time student or physically or mentally not able to care for himself or herself)
Payee – The payments for care cannot be paid to someone you can claim as your dependent on your return or to your child who is under age 19, even if he or she is not your dependent
Filing Status – Your filing status must be single, married filing jointly, head of household, or qualifying widow(er) with a dependent child ;
Care – The care must have been provided for one or more qualifying persons;
Home – The qualifying person must have lived with you for more than half of 2007
There are limitations on the amount of credit you can claim. If you received dependent care benefits from your employer, other rules apply.