Get a tax credit for child care expenses

Do you pay for child care so you can work?  If you do, don't overlook the child and dependent care credit, which directly offsets the taxes you owe.

Claim the credit for preteens and other dependents.  This credit allows you to offset some of the expenses you incur so that you can be gainfully employed.  As the name implies, the credit doesn't apply just to children.  You can claim expenses for any dependent under age 13 or for any other dependent who is incapable of caring for himself.  For example, dependent care expenses paid for an aged parent or a handicapped spouse could qualify for the credit.

How much is the credit?  For 2002 returns, the maximum credit ranges from 20% to 30%, depending on your income.  You can claim the credit for up to $2,400 of expenses paid for one qualifying individual and up to $4,800 paid for two or more.  In other words, the maximum credit could be as high as $1,440 for two dependents' care.

The credit increases in 2003.  For 2003, the maximum credit rate increases to 35%.  The maximum amount of eligible expenses increases to $3,000 for one dependent and to $6,000 for two or more.  Remember that the credit directly reduces taxes that you might otherwise owe.

This credit is well worth claiming, but the rules can be complicated.