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For the day-care expenses to be eligible for deduction, it has to be necessary for you to work or find employment. If your spouse doesn’t work and isn’t a full-time student, you can’t claim the deduction. Nor can you claim a day-care expense that isn’t related to work. For example, if your day care offers a special session for a “Parents' Night Out” promotion outside of your regular business hours, those expenses could not be deducted. To claim the deduction, you have to file as single, married filing jointly, head of household or a qualifying widow or widower; married taxpayers who file separate returns generally can’t claim it.
There’s a limit to the IRS' largesse. The maximum expense you can count is $3,000 for one child or $6,000 for two or more. If you pay more than that, the extra amount can’t be considered. However, if you have multiple children in day care, more than $3,000 in expenses for one child can be considered as
long as the maximum doesn’t exceed $6,000. If you have a 4-year-old in day care with $5,500 in day-care expenses and a 12-year-old who just goes to day care after school on occasion and generates just $1,000 in expenses, you can still use a total of $6,000 when performing the calculation.
Pick Your Percentage
Only a portion of your qualified expenses is taken off your taxes. You can deduct 35 percent of day-care expenses if you make $15,000 or less in adjusted gross income -- a percentage that drops as your income rises. If your adjusted gross income is $43,000 or greater, only 20 percent of qualifying expenses can be deducted. Moreover, this amount can’t be greater than your overall tax burden. If you qualify for a $1,000 credit but have a tax bill of $500, you’re limited to a $500 credit.
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