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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.

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    What does your tax consultant say when you ask him why you cannot make the claim?
    – ChrisInEdmonton
    Mar 7, 2016 at 17:12
  • He simply says i cannot claim the benefits for child care in my IT. The issue is previously i was relatively new to the USA and was not much aware of the benefits and claims you can file during the IT filing. So i did not have anything to argue about with him. But now since i saw the above mentioned article on IRS website i think there is definitely some thing i can claim w.r.t child care. I just need to prepare myself about how i can talk to him if he says "NO" this time again. Probably something i can say to him without offending him ?
    – user979189
    Mar 7, 2016 at 17:29
  • @user979189 why don't you ask him why? He's supposed to explain.
    – littleadv
    Mar 7, 2016 at 17:41
  • What's the reason he says you cannot claim? Are you and your spouse both employed and paying US taxes?
    – Joe
    Mar 7, 2016 at 17:49
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    @JoeTaxpayer Child tax credit does, but not Childcare tax credit - that goes down to 20% but stops decreasing after $43k AGI.
    – Joe
    Mar 7, 2016 at 18:05

1 Answer 1

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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.

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  • Thanks for your reply. What if my employer doesnt offer dependent care FSA? Can i enroll in it myself?
    – user979189
    Mar 7, 2016 at 18:20
  • No, FSAs are employer-provided benefits and cannot be used without an employer who provides them. Either you or your spouse should be able to enroll, though, if only one of your employers provides it. This is part of the reason for the Childcare Tax Credit existing, I suppose - it is not quite as good as a Dep FSA, but at least gives you some small relief.
    – Joe
    Mar 7, 2016 at 18:24
  • I am literally paying a fortune towards child care and it seems i can claim the benefit upto only USD 3000 per child. Is there any other option to FSA , which i can enroll as an individual? Both me and my wife work for small employers and they dont offer it.
    – user979189
    Mar 7, 2016 at 18:29
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    FSA would be only $5000 in total, and so it wouldn't really help you all that much. I hear you on the cost of childcare, I'm paying a mortgage payment into mine right now (as in, my monthly mortgage expense and my monthly chlidcare expense are roughly equal). Unfortunately, that's all you get right now.
    – Joe
    Mar 7, 2016 at 19:04
  • Do you want to add links to Form 2441 and its instructions?
    – JTP - Apologise to Monica ♦
    Mar 7, 2016 at 22:07

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