Dependent Care Credit for 2021:
This credit used to be a non-refundable credit, meaning it could only offset(pay) part or all of your income tax-liability--depending on the amount of your daycare expenses and income. Unfortunately, if you had no income tax liability, then you could not use the credit. I stress the words income tax liability here because if the client had self-employment taxes, the credit could not be used to pay them. Now, with the changes made, beginning in Tax Year 2021, the Dependent Care Credit can now be a refundable credit, that means you can get part, or all, of the credit refunded to you. And, the credit amount has increased—drastically.
More information on 2021 Dependent Care Credit can be found at IRS.gov at:
www.irs.gov/newsroom/child-and-dependent-care-tax-credit-faqs (For up-to-date information please check this link) https://www.irs.gov/newsroom/new-faqs-available-to-aid-families-and-small-business-under-the-american-rescue-plan General Information (for 2020 taxes not yet updated for 2021 changes) www.irs.gov/publications/p503 As of now, these changes to the Dependent Care Credit are for 2021 tax year only. They do not apply to future years.
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General Requirements: (accessed from IRS 6/17/2021)
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You can contact me at maryvitataxes@gmail.com
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Please note: I, Mary Meador, AM NOT a certified accountant or tax law expert. I volunteer with VITA providing free tax preparation for individuals and families whose income is less than $66,000 a year. We deal with simple returns at our sites. I cannot guarantee the accuracy of all the information on this site as tax laws change and I may not have a clear understanding of complicated issues. I am trying to provide basic tax preparation information for our volunteers to get started--remember Publication 4012 is your go-to resource for questions, as well as irs.gov and Publication 17.
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