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Child care tax credit doubles this season for 2022 Tax Year: How to claim up to $16,000
22nd January 2022 • Fresno Venture Capital Partner Podcast • MKG Enterprises Corp
00:00:00 00:07:07

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The child and dependent care credit allows taxpayers to directly reduce their taxes by the amount spent on expenses related to child or dependent care, such as day care, babysitters or related transportation. Thanks to a one-time expansion in the American Rescue Plan Act, parents who paid for child care in 2021 are eligible to receive up to 50% of their expenses back as a tax break or refund.

The expanded child care tax credit maxes out at $8,000 for one dependent and $16,000 for two or more. The catch? You'll need all your receipts and other monetary proof to make sure you can claim the tax break when you file your income tax return. 

The child and dependent care credit is a tax break designed to let parents claim expenses from child care. For example, if you paid for a day care provider while you were working, that expense can be claimed as a credit when you file your taxes this year.

How is the child care credit different for 2021 taxes? In previous years, the maximum amount you could claim was $3,000 for one child or $6,000 for two or more. For 2021 expenses, you can claim up to $8,000 for one child or dependent and up to $16,000 for multiple children. The one-time expansion of the child care credit for 2021 also increases the maximum return rate for child care expenses from 35% to 50%.

What does that mean? In brief, for the 2021 tax year, you could get up to $4,000 back for one child and $8,000 back for care of two or more.

Before the American Rescue Plan, the child and dependent care credit was nonrefundable, meaning it could reduce your tax bill to zero but you would not receive a refund on anything extra. Now, the credit is fully refundable, meaning that you will receive money for it even if you don't owe taxes.

Learn more about 2022 Tax Changes

https://mkgtaxconsultants.com/2022-tax-changes/

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