Sunday, January 15, 2006

dependent care credit

A person who pays someone to care for an elderly dependent while he or she works may be able to take a tax credit of up to 30 percent of the amount paid for such care. To qualify, the person paying for care and his or her spouse must have income from work during the year. The expenses incurred for the dependent care must be incurred to allow that person and his or her spouse to work or look for work. The dependent must be physically or mentally incapable of caring for him or herself.
Work-related expenses are limited to $2,400 for one qualifying dependent or $4,800 for two or more dependents. The most the person paying for care can reduce his or her tax in any year is $720 if expenses are for one qualifying person or $1,440 if the expenses are for two or more dependents.
Department of the Treasury, Internal Revenue Service. Publication #503, 1987.
Friedman, D. E. "Eldercare: The Employee Benefit of the 1990's," in Aging, Goldstein, E. C., ed. Vol. 3, Art. 13. Boca Raton, Fl.: Social Issues Resources Series, Inc., 1981.


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