At some point in January, negotiations will resume in the Senate over President Biden’s stalled legislation that will, among other things, fund 12 more months of child tax credit stimulus checks. For now, though, 2022 is shaping up to be nothing like 2021 on the stimulus check front. This is not to say that there won’t be any such related benefits available for Americans — just not at the cadence everyone benefitted from this year. One such example of what’s coming next year? The Child and Dependent Care Credit, which taxpayers can take advantage of when they file their federal income tax return in just a few months’ time.
Child and Dependent Care Credit
Perhaps the biggest difference between this benefit and the other stimulus checks that Americans are used to? You actually have to “ask” for this one. It won’t come automatically, in other words. Which is the way the child tax credit checks will (if and when they restart).
Here’s what the IRS says about the child and dependent care credit. “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 benefit was another that resulted from the $1.9 trillion stimulus law earlier this year, the same one that provided the new round of stimulus checks for $1,400.
Families with an adjusted gross income of no more than $125,000 can get the full tax credit. It will cover 50% of their qualifying expenses. However, that number drops to 20% for incomes between $125,001 and $183,001.
Other important details about the credit, from the IRS
- You have to complete Form 2441, Child and Dependent Care Expenses, to claim the credit. And include the form when you file your federal income tax return.
- If your dependent or spouse can’t take care of themsleves? “Your records should show both the nature and length of the disability.”
- Records you should keep to support your claim for the credit are in IRS Publication 503, Child and Dependent Care Expenses and Q3.
Fully refundable
For now, this benefit is only available for the 2021 tax year, for which you’ll file your return in 2022. The benefit 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 another dependent who you take care of who can’t care for themselves.
The point of this credit is to help pay you back for certain expenses. Specifically, ones incurred in caring for those dependents so that 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. Which means that a working family that meets the income requirements? That family could, for example, get an additional stimulus payment of up to $8,000 as a tax credit.
Also important to know, per the IRS: “For 2021, the credit is refundable for eligible taxpayers. This means that even if your credit exceeds the amount of Federal income tax that you owe, you can still claim the full amount of your credit, and the amount of the credit in excess of your tax liability can be refunded to you.”
