While 2021 began with a third stimulus check for millions of Americans, there hasn’t been any since then, and while it doesn’t seem like 2022 will start with any direct payments from Uncle Sam, that doesn’t mean you can’t get money from the government – in fact, many can receive up to $8,000, but you have to ask for it.
It’s called the Child and Dependent Care Tax Credit and it stems from the same relief package as the third stimulus check – the American Rescue Plan. According to the IRS, “The Child and Dependent Care Tax Credit is a credit allowed for a percentage of work-related expenses that a taxpayer incurs for the care of qualifying persons to enable the taxpayer to work or look for work.”
What it does is help parents and/or caretakers struggling financially during the pandemic by assisting them with costs related to parenting or caretaking. For every family with an income of $125,000 or less, the credit will cover 50% of qualifying expenses up to $8,000 associated with the care of a child under 13 or a spouse, parent or other dependent who is unable to care for themselves. If a family is caring for two or more eligible dependents, they could get up to 50% of $16,000 in expenses. For families earning between $125,000 and $183,000, it will cover up to 20%.
However, to get it, a form must be filled out. It is IRS Form 2441 and it needs to be submitted when you file your federal income tax return. The money will come in the form of a tax credit, which is far better than a tax deduction since a credit is dollar for dollar, so one for $8,000 will reduce your tax bill by $8,000, as opposed to a deduction, where an $8,000 deduction might only reduce your bill by $1,000. Also, the IRS notes, “For 2021, the credit is refundable for eligible taxpayers. This means that even if your credit exceeds the amount of Federal income tax that you owe, you can still claim the full amount of your credit, and the amount of the credit in excess of your tax liability can be refunded to you.”
Learn more about the credit here.