The child and dependent care tax credit was enhanced under the ARP and enacted in March 2021, to assist families in the recovery from the COVID-19 pandemic. The Internal Revenue Service recently posted new frequently-asked-questions (FAQs) to assist families in claiming credits under the American Rescue Plan (ARP).
The FAQs were updated on June 11, 2021.
The FAQs provide information on eligibility, computing the credit amounts, and how to claim these important tax benefits.
FAQs for Claiming the Credit
The following key questions are answered by clicking here.
Am I eligible to claim the credit?
Who is a qualifying person?
What does “physically or mentally not able to care for oneself” mean?
For 2021, what percentage of my work-related expenses are allowed as a credit?
Can this 50-percent amount of work-related expenses be reduced?
For 2021, is there a limit on the amount of work-related expenses I can take into account in calculating the credit?
For 2021, can I take the full credit even if my credit exceeds the amount of taxes I owe?
Are there special residency requirements for the refundable portion of the credit?
My spouse was out of work during the year. Can we still claim this credit?
My spouse was a student or unable to care for herself during the year and did not work. Can we still claim this credit?
How do I claim the credit for 2021?
What information do I need from my care provider to claim the credit?
If I live in American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, or the U.S. Virgin Islands, can I claim the credit if I’m otherwise eligible?
For more than half of 2021, I will live overseas, but not in one of the five U.S. territories. Can I claim the refundable credit on my 2021 tax return?
My main home is in one of the 50 states or the District of Columbia, and I am in the U.S. military and stationed outside the United States for an extended period of time. Am I treated as living in my main home during that time for purposes of the credit?
What qualifies as a work-related expense? The IRS outlines the answers to these questions. Click HERE to view the answers.
I pay my mother to watch my children during the day. Does this count as a work-related expense?
My child receives care outside my home so that I can work. Does this count as a work-related expense?
My child will be attending a week of overnight camp. Does that camp count as a work-related expense?
My child is enrolled in private kindergarten. Are the expenses to attend the private kindergarten work-related expenses?
I send my child to after-school care. Are these expenses work-related expenses?