PARENTS will be eligible to claim up to $16,000 in childcare expenses when this year’s taxes have been filed, a financial analyst has revealed.
The American Rescue Plan, which was passed by lawmakers in March, features a temporarily expanded childcare tax credit.
Parents can claim up to $8,000 for one child or up to $16,000 for multiple kids, claims Garrett Watson, senior policy adviser analyst at The Tax Foundation.
Usually, parents can only claim $3,000 for one kid and up to $6,000 for two or more children, CNET reports.
To qualify, your household’s gross income must be less than $125,000 otherwise the tax credit will phase out at 50 per cent.
For incomes above $183,000, the tax credit phases out at 20 per cent and remains at that level for incomes below $400,000.
The rate is phased out completely for households earning $438,000 and above.
Parents will not be able to claim the deduction until next year when 2021 tax returns are filed.
In the meantime, it’s recommended that you complete a detailed record of all childcare expenses.
According to the Internal Revenue Service (IRS), dependants must be under the age of 13, or unable to care for themselves if older than 13.
Dependents may be physically or mentally handicapped and could be eligible if they have a social security number.
In divorced or separated households, the parent who has primary custody can claim the tax credit.
If married, both parents will have to be working – or claiming unemployment benefits – to be eligible.
It comes as a family of four will get $8,200 more in stimulus cash under a new American Rescue Plan as more checks are set to arrive this week.
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President Joe Biden’s plan will see each parent and child be given $1,400 in direct payments and because of the expanded Child Tax Credit, families will also be granted $2,600 more in tax credits.
The additional money is aimed to help families struggling the most in the pandemic.
The Treasury and the IRS are working to ensure that more payments will go out this month with the first checks arriving at some households last week.