child care expenses not taken into consideration by my tax consultant

Question

I am paying huge amount of money for last 3 years for my children's daycare. I see here that i can claim the expenses incurred for child care so i and my spouse can work. I checked all the 10 clauses in that post and i think i am eligible for claiming tax benefits for child care expenses in my income tax filing. The child care institution also mails me the statement "for income tax purposes" every year during the month of January. However every time i file my taxes with my tax consultant, i ask him whether i can claim the tax benefits for child care and every time he says i cant. I fall into 25-27% tax bracket and am the resident of Illinois. What could be the possible reasons i cannot claim the tax benefits for the child care.

Answer 1

You have two options for deducting childcare expenses in the US. Both are discussed in Publication 503. You can claim the Childcare Tax Credit using Form 2441, which has instructions here.

First, you can enroll in a dependent care FSA. You enroll in this through your employer; either you or your spouse can. $5000 can be deducted pre-tax from your paycheck to pay for childcare this way. This does not have income limits.

Second, you can claim a credit based on expenses up to $3000 per child, up to two children ($6000 total), for the Child Care Tax Credit. This is combinable with the FSA, only for the last $1000 if you have 2+ children (so $6000 total between the two). That has income limits to claim over 20% of the credit; so if you are in the 25% bracket, you will only get to claim 20% of the total, either $200 if you have an FSA or $1200 if you do not.

Both spouses must work full time or have other qualifying details (such as being a full time student) in order to qualify for the credit; see publication 503 above for more information.