 Income tax 2021-2022, child and dependent care expenses, credit definitions. Get ready to get refunds to the max, dive into income tax 2021-2022. Most of this information can be found in the form 1040 tax year 2021 instructions IRS website irs.gov irs.gov income tax formula down in the credit area noting that both credits and deductions are good but if you had a dollar credit versus a dollar deduction credit typically better because you would generally get the full dollars worth on the credit as opposed to the dollar of deduction which would be a dollar decrease to the taxable income then tax being calculated on it. Also note that we have the refundable and non refundable types of credits or categories of credits refundable credits mean that they won't take your liability in essence below zero whereas the refund that's what the non refundable means the refundable credits mean that they might take your liability below zero resulting in a situation where you could possibly get a refund which isn't really a refund but might be called a refund that's really more of like a benefit type of program and we could have some credits that have a non refundable and refundable components to them. So this is going to be the second page of the form 1040 we're looking down here we're ultimately the credit will flow into it's going to go from the the form to the schedule three and then to the second page of the form 1040 line 31 we're looking at the form that being the 2441 the child and dependent care expenses that's the credit form that we're focused on this time. Also just note that we're not talking about the child tax credit here that's a different credit we're talking about the child and dependent care expenses credits they sound simpler but they're different this is not the child tax credit this is the child and dependent care expenses we're focusing in on here definitions dependent care benefits dependent care benefits may include amounts your employer paid directly to either you or or your care provider for the care of your qualifying persons while you worked the fair market value of care in a daycare facility provided or sponsored by your employer and pre tax contributions you made under a dependent care FSA so your salary may have been reduced to pay for these benefits if you receive dependent care benefits as an employee they should be shown in box 10 of your of your form w2 wage and tax statement so if if you're if you don't get these from your employer they might be something to kind of look into because that is a way that you could possibly get you know a benefit from your employer they can give you possibly money that you know wouldn't be subject hopefully to the taxes because it would be in box 10 and so on so you could take a look into that more detail if it would be applicable to you benefits you receive as a partner should be shown in box 13 of your schedule k1 so if you have a partnership agreement and then it would be on the k1 which is the flow through document of the form 1065 which is the tax return for a partnership with the code o definitions continued qualified persons a qualified person is any of the following one a qualifying child under age 13 whom you can claim as a dependent if the child turned 13 during the year the child is qualified person for the port of the year he or she was under age 13 so you've got that fractional year thing too for a disabled spouse who wasn't physically or mentally able to care for himself or herself three any disabled person who wasn't physically or mentally able to care for himself or herself whom you can claim as a dependent or could claim as a dependent except and here's that little exception rule one or a the disabled person has gross income of 4300 or more be the disabled person filed a joint return or see you or your spouse a filing jointly could be claimed as a dependent on another taxpayers 2021 return definitions continued if you are divorced or separated see special rule for children of divorced or separated parents or parents who live apart below so we always have that kind of gray area where you've got the separated type of situation where you can have unusual circumstances so you can dig into that if that is the case see the instructions for line 13 later for a special rule that allows 2020 dependent care benefits reported online 13 to be used in 2021 for a qualified child that is under age 14 to find out who is a qualified child and who is a dependent you can see publication 501 dependence standard deduction and filing information to be a qualified person generally the person must have lived with you for more than half of 2021 special rule for children of divorced or or separated parents or parents who lived apart your child your child as a dependent he or she is treated as your qualified person if the child was under age 13 or wasn't physically or mentally able to care for himself or herself the child received over half of his or her support during the calendar year from one or both parents who are divorced or legally separated under a decree of divorce or separate maintenance are separated under a written separation agreement or lived apart at all times during the last six months of the calendar year the child was in the custody of one or both parents for more than half of the year and you were the child's custodial parent generally the custodial parent is the parent with whom the child lived for the greater number of nights in 2021 if the child was with each parent for an equal number of nights the custodial parent is the parent with the higher adjusted gross income for details and accept an exception for a parent who works at night you can see publication 501 generally the non custodial parent can't treat the child as a qualifying person even if that parent is entitled to claim the child as a dependent under the special rules for a child of divorced or separated parents or parents who live apart so qualified expenses what are qualified expenses these include amounts paid for household services and care of the qualifying person while you worked or looked for work so that's the general rationale for the credit your work can be for others or in your own business so you can have a sole proprietorship or be a w2 employee for example and it can be either in or out of your home child support payments can't aren't qualified expenses child support payments aren't qualified expenses also expenses reimbursed by a state social service agency aren't qualified expenses generally if you worked or actively looked for work during only part of the period in which you incurred the expenses you must figure the expenses for each day so you got that proration which could be a little bit confusing however there are special rules for temporary absences or part-time work also if part of an expense is work related for either household services or the care of a qualifying person and part is for other purposes you have a have to have to divide the expenses however so you might have to divide the expenses in that instance to allocate out however you don't have to divide the expenses if only a small part is for the other purpose so if it's a non-material amount I would say you can see publication 503 for more details here household services what are those these are services that needed to care for the qualified person as well as to run the home while you worked or looked for work they include for example services of a cook maid baby sipper sitter housekeeper or cleaning person if the services were partly for the care of the qualifying person however they don't include services of a chef bartender or gardener what the bartender I can't well that's ridiculous how you can also include a share of the employment taxes paid on wages for the qualified child and dependent care services care of a qualifying person expenses for the care of a qualified persons while you worked or looked for work only if their main purpose is the person's well-being and protection it doesn't include the cost of food lodging education clothing or entertainment you can include the cost of care provided outside your home for your dependent under age 13 or any other qualifying person who regularly spends at least eight hours a day in your home if the care was provided by a dependent care center the center must meet all applicable state and local regulations a dependent care center is a place that provides care for more than six persons other than persons who live with us who live there and receives a fee payment or grant for providing services for any of those persons even if the center isn't run for profit you can include amounts paid for items other than the care of your of your child such as food and schooling only if the items are incidental to the care of the child and can't be separated from the total cost but don't include the cost of schooling for a child in kindergarten or above you can include the cost of a day camp even if it specializes in particular activities such as computers or soccer but don't include any expenses for sending your child to an overnight camp summer school or tutoring program medical expenses some disabled spouse and dependent care expenses can qualify as medical expenses if you itemize deductions on schedule a form 1040 so those are the itemized deductions however you can't claim the same expenses as both dependent care expenses and medical expenses so if you're deducting them on schedule a you can't also get a benefit for the credit calculation of the same amounts that's the double dipping thing again see publication 502 medical and dental expenses and publication 503 for details