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Show Don't overloottjiild carie crfedit By KENNETH J. ROSE Editor's note: Bottom Line author au-thor Kenneth J Rose is the owner of Rose and Associates, a small business tax consulting, and finan-1 cial planning firm in Bountiful. In an age where more and more families are headed by a single parent par-ent or where both the husband and - wife must work in order to make ends meet, a tax advantage that can't be overlooked is the child and dependent care credit. A credit is a direct reduction in the taxes paid, as opposed to a deduction de-duction to arrive at taxable income. v What we are considering here is a credit. In this case the credit amounts to a percentage of, your qualified expenses to a maximum of $2,400 if you have one qualifying dependent and $4,800 if you have two or more. The percentage is on a sliding scale based on your adjusted gross income. There are a few requirements to meet in order to be eligible for the credit. First you must have an. eli- gible dependent requiring care. That isn't limited to a dependent child. It could be a spouse who -requires special care or attention, or it could be any other dependent, such as a parent, brother or sister who is disabled and requires special care. The child must be under IS or not otherwise able to,are for himself or herself.. You muSt also keep up your home, which includes one or more" qualifying dependents. Next, the costs must be incurred in order to allow both you and your spouse to work. In the case of a single parent or a disabled spouse there is an exception to this rule and the only requirement is for it to -' enable, you to work, .There is an- other exception to this rule. Child or dependent care expenses incurred to enable a spouse to be a full time student also qualify for the credit. The list of qualifying expenses is quite extensive. Your best bet on that one is to check with your tax advisor, or get the publications from the IRS. However, payments made i. to a relative can be eligible, if thar relative is not one of your depen--dents. . ' ' If you are paying someone to live or come into your home on a regu- y lar basis to care fox your dependent, ' you may have to withhold and pay . payroll taxes on their wages. Publi- Muon15jCiraurJE-wilLtelLyou what you need to do' and how to file tax reports in this situation. Again, if you are not sure check ; with the IRS or your tax advisor. Questions asked early can avoid costly mistakes later, and could even save you money. |