President Obama has proposed to increase the child and dependent care income tax credit currently available to low and middle income families which could provide extra cash to be applied towards family credit card debt loads. Many working parents are struggling to get out of debt and meet day to day expenses and this could help them on achieve their goals.
The current childcare credit is available on a sliding scale. Families with an adjusted gross income below $15,000.00 are allowed to deduct 35 percent of their child or dependent care expenses. Those with an adjusted gross income of $43,000.00 or more are allowed to deduct 20 percent of their child or dependent care expenses. All earnings brackets are limited to a $3000.00 deduction total for one child and $6000.00 for two or more children.
President Obama’s budget proposal includes a provision to increase the Child and Dependent Care Tax Credit rate to 35 percent for families making under $85,000.00 per year. He has also proposed an increase of $1.6 billion for child care funding for low income families.
To qualify for the Child and Dependent Care Tax Credit the dependent must meet certain qualifications:
- The dependent must be 12 years of age or younger OR 12 years of age or older and disabled.
- The dependent must reside in the taxpayer’s home and the taxpayer must provide more than 50 percent of the cost of maintaining the home.
The person who provides daycare services must not be another of the taxpayer’s dependents. The taxpayer must report the daycare provider’s name, business name (if applicable), address, and either Social Security or Employer Identification Number.
