How much can I claim for the child and dependent care credit?
If you meet the requirements to claim the child and dependent care credit, the actual amount of your credit depends on what your adjusted gross income for the tax year was. Generally, the credit will be between 20% and 35% of the first $3,000 of your expenses (if you have one qualifying child or dependent) or $6,000 (if you have two or more qualifying children or dependents).
To calculate your credit more specifically, you should begin by totaling the relevant care costs. If you are only claiming expenses for one child or dependent, the number you should use is the total of your expenses, or $3,000, whichever is lesser. If you are claiming two or more children or dependents, the relevant number will be the lesser of your actual expenses or $6,000. Once you have this number for your expenses, you must subtract any tax-free benefits you received from a dependent care plan offered by your employer (such as an on-site day care, or some stipend). Finally, if your adjusted gross income is less than the expense number you calculated, you should use your adjusted gross income instead (for example, if you calculated your expenses as $2,500, but your adjusted gross income was only $2,000, you will use the $2,000 amount as your expense total).
To calculate what percentage of these expenses you can claim a credit for, you must look at your adjusted gross income. If your adjusted gross income was under $15,000 for the 2006 tax year, you get a credit equal to 35% of your expenses (which means your credit will be $1,050 for one child or dependent and $2,100 for two or more children or dependents, assuming you had expenses of at least $3,000 or $6,000). If your adjusted gross income for the 2006 tax year was over $43,000, you are entitled to a credit equal to 20% of your expenses (which means your credit will be $600 for one child or dependent and $1,200 for two or more children or dependents, again assuming you had expenses of at least $3,000 or $6,000). Finally, if your adjusted gross income was between $15,000 and $43,000, the credit will be somewhere between these amounts.
To help determine the precise amount you may claim as your child and dependent care credit, you should review Form 2441 (if you are filing a Form 1040) or Schedule 2 (if you are filing a Form 1040A).