We’ve previously called 2021 the year of the stimulus check. And there’s so much evidence that continues to prove why this is the case. From the ongoing child tax credit checks, to some people receiving what amount to fourth stimulus checks. Those are coming soon to residents of California. As well as to parents who give birth to a new child at any point in 2021. Also, there’s a stimulus benefit that many people probably don’t even know exists — the so-called Child and Dependent Care Credit.
Here’s what it is, and what you need to know about it.
Child and Dependent Care Credit
The credit has been expanded for 2021 only. And here’s what the IRS says about it. “The child and dependent care tax credit is a credit allowed for a percentage of work-related expenses that a taxpayer incurs for the care of qualifying persons to enable the taxpayer to work or look for work.”
This is another important benefit resulting from the $1.9 trillion stimulus law enacted in March. It’s the same law that included the third round of $1,400 stimulus checks from earlier this year.
According to Kiplinger’s, every family with an adjusted gross income of no more than $125,000 can get this tax credit for child and dependent care expenses. It will cover 50% of their qualifying expenses, but that number drops to 20% for incomes between $125,001 and $183,001.
Eligibility, payments, and more
You can learn more about the Child and Dependent Care Credit by visiting this IRS portal which walks through all the key details.
To claim the credit for 2021, the tax agency says you’ll need to complete Form 2441. There are also some other requirements that might trip you up, if you’re not careful. According to the experts at TurboTax, for example, you (and your spouse, if applicable) must have “earned income,” from a job. If you’re married, you must file a joint tax return. Also, you’re required to provide details like the name and Taxpayer ID Number of the person who provided the care.
The way this credit works, it’s only for the 2021 tax year. And it can get you as much as 50% of up to $8,000 of the cost of child care and similar expenses tied to the care of children under 13. Or a spouse, parent, or other dependent who you take care of who can’t care for themselves. The credit is meant to defray those expenses so you can focus on your own work. You can also get up to 50% of as much as $16,000 in expenses for two or more dependents.
All of this means that a working family that meets the income requirements could, for example, get an additional stimulus payment of up to $8,000 as a tax credit.