 Income tax 2021-2022, child and dependent care expenses credit, who can take the credit or exclude dependent care benefits. Get ready to get refunds to the max diving into income tax 2021-2022. Most of this information can be found in the form 1040 instructions tax year 2021 IRS website irs.gov irs.gov income tax formula down here in the credit area. Both credits and deductions being good, but if you had a dollar credit versus a dollar deduction, the credit would generally be better because you get the full dollars worth of the credit as opposed to the dollar of deduction, which would decrease the taxable income, the tax then being calculated on it. The credits can be broken out into two main categories, non refundable credits and refundable credits. Non refundable credits mean they're not going to take your tax liability below zero in essence. Refundable means they could and if they did, it wouldn't really be a refund that you would be getting at that point. Although it would still be called a refund. It's kind of like a benefit program at that point. Some credits can have both a non refundable and refundable portion to them. This is the second page of the form 1040. The credit is going to roll into schedule three and then roll in here to the second page of the form 1040 line 31. This is the form 2441, the child and dependent care expenses where the information is put. Child and dependent care expenses, credit who can take the credit or exclude dependent care benefits. You could take the credit or exclude if all five of the following apply. Number one, your filing status may be single, head of household, qualified widow, widower with dependent child or married filing jointly. If your filing status is married filing separately, that's where they're kind of skeptical. This is common of many types of credits and deductions. You got to be careful with the married filing separately. If so, you can see married filing separately later. Number two, the care was provided so you and your spouse if filing jointly could work or look for work. So that's the justification of the credit. So how could you justify that or show that? Well, one way would be that if you had the two spouses, if they were married, because that's mostly the more complex situation, oftentimes if you have two spouses, then you would show that they're both possibly working by having the income, possibly W2 income or self-employment income like a Schedule C possibly. However, if you don't find a job and have no earned income for the year, so now you're in a situation where you don't have any earned income, which you would typically need to see that you're at least looking for the job in order to qualify for the expenses, you can't take the credit or the exclusion. And that's because the IRS generally is looking for that earned income as kind of like the evidence of the employment status. But if you or your spouse was a full-time student or disabled, see the instructions for line four and five later. So there's exceptions there with those items. Number three, the care must be for one or more qualified persons. See qualified persons earlier. Number four, the person who provided the care wasn't your spouse, the parent of your qualifying child or a person whom you can claim as a dependent. So one more time, obviously you can't pay your spouse to take care of the child and get a deduction for that. That would generally be the parent of your qualifying child. So if your parent of the qualifying child isn't the spouse, then you can't pay the other, you know, the parent of the child. Because again, you would think that that would be basically their own out of their own responsibility or whatnot, or a person whom you claim as a dependent. So if they're dependent, like another child or something like that, you can't pay another dependent to take care of another dependent and get a credit for paying, you know, the dependent or something like that. So if your child, including stepchild or foster child provided the care, he or she must have been age 19 or older by the end of 2021, and he or she can't be your dependent. So that means that you could possibly pay someone that is related to you, such as if your child, including stepchild or foster child provided the care, but they generally can't be the dependent at that point in time. You can't have one dependent taking care of the other dependent. You're paying one dependent to take care of the other dependent and then writing off or getting a credit with regards to those payments. So number five, you report the required information about the care provider on line one, and if taking the credit, the information about the qualifying person on line two. So in other words, if you look at the form 2441, we've got the part one personal organizations to provide the care. So here's the personal organization. And then we've got the credit for child or dependent care expenses. There's the person being the dependent typically married person filing separately. So this is that unusual situation where the iris is more skeptical. You got married filing separate. Generally married persons must file a joint return to claim the credit. If your filing status is married filing separately and all the following apply, you are considered unmarried for purposes of claiming the credit on form 2441. So if you're married, typically you have two options. You can't go back to single or head of household. Usually you have to go between married or married filing separate under most conditions. If you choose to go married filing separate, then you lose capacity to take some credits, including possibly this one. Unless you have an unusual kind of situation in which case you might be considered unmarried for the purposes of claiming the credit, allowing you in that unusual situation to take the credit. So you lived apart from your spouse during the last six months of 2021. So this is one of those areas where it's like you're kind of separated, but you're not divorced, but possibly legally separated, which could be dependent on state law in terms of whether you're actually separated or not and so on. So that's where it gets a little bit in that gray area. Your home was qualifying person's main home for more than half of 2021. You paid more than half of the cost of keeping up that home for 2021. If you meet all the requirements to be treated as an unmarried and meet items two through five listed earlier, you can generally take the credit or the exclusion. If you didn't meet all of the requirements to be treated as unmarried, you can't generally take the credit. However, you can generally take the exclusion if you meet items two through five. So example, Amy separated from her spouse in March. She isn't separated under a decree or divorce separation divorce or separate maintenance agreement and uses the married filing separate status. So she was married, but she's kind of in that limbo area because she's basically separated but not formally divorced. So Amy maintains a home for herself and Sam, her disabled father. So now we're talking about her father here disabled. Sam is permanently and totally disabled and unable to care for himself because Sam earns $5,600 in interest income. Amy can't claim him as a dependent. So she would be able to claim him as a dependent except for his earning threshold, which is over the threshold. It's at that $5,600. So his gross income is greater than $4,300, which is that threshold to claim as a dependent. And because Amy isn't able to claim Sam as a dependent and she is still married as of the end of the year, she can't use the head of household filing status. So she's she can't use the head of household filing status because now she's she would be single or or she's she was married but not exactly divorced and so on. So Amy's filing status is married filing separately and Sam is a qualified person for the child and dependent care credit. So so that so once again, Amy's filing status is married filing separately and Sam is a qualified person for the child and dependent care credit. That's the exception kind of area. Because of the following facts, Amy is able to claim the credit for child and dependent care expenses, even though Amy uses the married filing separately filing status. Amy didn't live with her spouse for the last six months of the year. She has maintained a home for herself and Sam a qualified persons since separated from her spouse in March. She maintains her own household and provides more than a half of the cost of maintaining that home for herself and Sam. Amy pays an adult daycare center to care for Sam to allow her to work.