There’s no denying that raising a child is costly and comes with many responsibilities. But thanks to the American Rescue Plan, you might be eligible for a credit to help offset some of the costs related to raising a child.
President Biden introduced the American Rescue Plan in March of 2021, which changed the child and dependent care credit requirements, making more families eligible for the credit. So if you paid someone to watch over your kids while you worked or looked for a job, you might be eligible to take some childcare tax credits.
The tax credit isn’t new and was started in the 1970s to help working families with the costs of childcare, after-school care and summer camps. This dependent care tax credit differs from the child tax credit
and helps families cover childcare costs for children under the age of 13 or any adult dependents.
But there’s a difference between a tax credit vs. tax deduction
. Deductions reduce your income amount before taxes whereas credits reduce the amount of taxes you owe or can increase your tax refund.
The Internal Revenue Service
issued the 2441 form, which is where you report your child and dependent expenses on your tax return.
Let’s take a look at Form 2441:
Taxes are a complex topic, but with the right information, you can score tax credits that will save you a significant amount of money. Learn more about the dependent care tax credit, eligibility requirements and how to file Form 2441.