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Basics of the Child and Dependent Care Tax Break

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Feb 13th 2017
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To hold down a job, do you pay someone to care for a child under the age of 13, a disabled dependent of any age, or a disabled spouse? Those payments for child and dependent care expenses may entitle you to a partial tax credit.

Unlike a deduction, which reduces the income on which you figure your tax, a credit is a dollar-for-dollar subtraction from the tax that you would otherwise owe. Calculate the credit on Form 2441, Child and Dependent Care Expenses, which must accompany your return.

The credit ranges from 20 to 35 percent, depending on your adjusted gross income (AGI), of the first $3,000 spent for the care of one person and the first $6,000 for the care of two or more persons. The 20 percent credit applies when AGI exceeds $43,000.

Assuming you are liable for Social Security tax payments for housekeepers and babysitters, count those taxes as part of your expenses.

If you’re married, both you and your spouse must work at least part time, unless one of you is disabled or is a full-time student. You needn’t itemize for charitable donations and the like to qualify for the credit.

Your allowable outlays include the entire salary paid to a housekeeper, even though the helper’s duties don’t include acting as a baby sitter or companion for someone in your home. All you need to establish is that the helper’s services partially benefit the person for whom care is being provided – for instance, a fourth-grader who’s away at school and never physically present while the cleaning of his or her room takes place.

In the case of a child under the age of 13, you can include payments for care outside the home by a nursery school, day care center, day camp (but not an overnight camp), or the home of a baby sitter. Don’t include payments for transportation between home and the day care facility.

Basics of Deducting Moving Expenses
The key requirement for deducting the costs of a job-related move is that your new job location is at least 50 miles farther from your old home than your previous job location was. To illustrate, if the distance between your old home and your old job is 10 miles, the distance between your old home and your new job has to be at least 60 miles.

There’s some leeway on the 50-mile minimum. The IRS doesn’t require you to measure the distance on the basis of a straight line on a map. It’s OK to calculate the mileage on the shortest of the routes that you would ordinarily travel.

Deductible outlays include the unreimbursed costs of transporting your family members, pets, and belongings to your new home. If you use your car for the move, deduct the actual cost of gas and oil or a standard mileage rate – 17 cents per mile for 2017, down from 19 cents for 2016, plus parking fees and tolls.

There’s no deduction, though, for any side trips taken for personal reasons, such as stopovers with relatives or sightseeing at Yellowstone while relocating from the West Coast to Connecticut. Your route, cautions the IRS, should be “the shortest, most direct one available by conventional transportation.”

The friendly folks at the IRS want to bestow presents on some newlyweds. Suppose the bride and groom lived in different cities last year. After the wedding, the husband moved to the bride’s city and got a job. The couple can deduct his moving expenses.

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