Things to Know about Daycare Tax Deduction: Requirements and Trivia

Things to Know about Daycare Tax Deduction: Requirements and TriviaLiving as a parent in a modern society sounds daunting and hectic. Not only do you need to work hard, but you also need to take good care of your kids. A solution exists for this problem, which is to pay someone to take care of your children. However, the cost is quite burdensome. The good news is that you are allowed to claim a daycare tax deduction or credit during the tax year. So, how much can you deduct?

daycare tax deduction

Basics about Daycare Tax Deduction

When it comes to childcare expense deduction, several limits apply to it depending on the qualifications and age of your child. If your kids are under the age of 7, the limit is $8000. For children aged 7-16, the deduction limit is $5000. You may also find a special deduction that can be as big as $11,000. This one only applies to children who suffice for the disability tax credit. What about older kids? Well, those who are age 15 or older are likely old enough to stay home alone until you or your spouse return from work. In the past, the age limit was 14 years old. Later, the law increased it to age 16. The rules about deduction and its calculation are simple, but you can opt for a professional tax who can help you with the paperwork.

Qualifications of Daycare Tax Deduction 

To get either the child credit or daycare tax deduction, you should meet some criteria. Learning these requirements helps you avoid problems when in the future. Here are the criteria:

  • The nanny or childcare provider cannot be those who are related to you including the child’s parent or your spouse.
  • You should have earned income for the tax year.
  • You are the main caretaker or custodial parent of that kid.
  • You should have used a dependent or child care service so that you can work or earn money outside.
  • You should have a qualified filing status. These can be either head of household, single, widow or widower, or married couple who file jointly.
  • The age of the dependent or your kid should not be over 13 years old. However, there is no age limit if this kid is incapable of caring for him or herself due to either physical or mental disability.
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Aside from those basic qualifications of a daycare tax deduction, you also need to meet other requirements. For example, there are the qualifying expenses. The basic qualification is the presence of a daycare fee. However, the IRS needs more than that to approve your claim. These include:

  • The cost of a housekeeper, cleaning, maid, or cook.
  • Costs that relate to a home care provider, nurse, or others for a disabled kid or dependent.
  • Childcare service is given by a licensed dependent care center or babysitter.
  • Summer camp fees can qualify for a daycare tax deduction or credit as long as it provides kid care while you (parent) are at work. That means overnight camps won’t qualify.

Also read : Getting to Know a CPA Tax Preparer and Why You Need It

About 2022 Daycare Tax Deduction

In 2021, parents who live in the United States got an advantage due to the Child Tax Credit boost. However, this policy doesn’t last for another year because President Biden failed the proposal to extend it. That means you need to obey the previous form starting from December 2021. The good news is you can take advantage of the Federal program in 2022. It states that the tax credit or daycare tax deduction would be around $4000 per kid for eligible households.

Claiming Daycare Tax Deduction or Child Care Credit

Many of you are aware of this type of tax deduction but not all of you know how to claim it. The procedure is simple and any parents should learn this. You only need to include it in your Form 2441 along with your tax return. What you should prepare is either a Social Security number or Taxpayer Identification for each qualifying kid. Don’t forget to include details like the TIN of a person who takes care of your kids while you are at work, the address, the name, and others. Here is an important tip. You should keep a copy of all those documents including payment receipts while filing. There are many methods that you can use to file it. For example, you can use tax software. In this case, you must attach the W-10 and Form 2411 to your tax return. Another method is by working with a tax preparer. In this case, you should ask him regarding qualifications and other requirements before submitting. This helps you avoid delays and other problems while filing.

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Other Important Things to Know about Daycare Tax Deduction

You must know that the daycare tax deduction is based on child care expenses. Thus, you should keep track of those expenses during the tax year. As for the details about these costs, you can refer to some points mentioned earlier. The next thing that you should recognize is the filing date. To be eligible for this benefit, you must file your taxes early and claim the deduction or credit on your tax form. Have no worries. You can take advantage of free tax filing assistance or software if your income is no more than $72,000. There are expenses that don’t qualify for this credit. For example, any expenses that you spent on transportation (to and from the childcare facility) won’t qualify this credit. Overnight camp expenses can’t also quality the deduction. The next example is any expenses that you spent on your kid’s education in kindergarten or higher level. Gardening and chauffeur expenses won’t qualify it either. What is more? If you spend money on school programs that are not meant for child care, you are not eligible for this tax credit or deduction.


Fees on kids’ daycare can be quite expensive for some parents. However, you cannot neglect the importance of this service either. The problem becomes worse when you need to pay your personal taxes in the current year. To make it less troublesome, you can claim a daycare tax deduction or daycare credit. As long as you meet the qualifications and you know how to file it accordingly, you are good to go.


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