If you have a child under the age of 13, or a dependent or spouse who is physically or mentally incapable of caring for him/herself, you are allowed a tax credit based on the expenses you incur for their care while you work or attend school. In general, you can claim the credit up to $3,000 worth of qualifying expenses for one child or dependent, and $6,000 if the care is for two or more. The minimum credit percentage is 35%, with the calculation made on Form 2441. The amount of qualifying expenses cannot exceed your income from your work.
If your employer provides day care, or a plan that reimburses you for day care expenses, you can exclude this from your income up to $5,000 per year. It is required that you meet the criteria above, and that you file Form 2441 with your return for that year, to elect the exclusion. Child care expenses for which you were reimbursed do not qualify for the credit explained above. And if your reimbursements exceed the $3,000/$6,000 maximums explained above, any additional costs you pay directly will not qualify for the credit.
In order to claim the tax credit or employer reimbursement
exclusion, you must file Form 2441 with your tax return for that year. On it,
you provide the name, address, Social Security number (Employer ID number, if
a commercial business or child care center) of EACH child care provider, and
the amounts paid to them.