Can Both Parents Claim Child Care Expenses on Their Taxes?

Determining who can claim child care expenses on taxes is an important aspect of financial planning for parents. These deductions reduce taxable income, offering relief to families balancing work and caregiving. The rules, however, can be complex, particularly for divorced or unmarried parents.

Understanding the nuances of claiming child care expenses is essential for compliance with tax regulations and maximizing potential benefits.

Who Qualifies for Child Care Expense Deductions

To qualify for child care expense deductions, expenses must enable the taxpayer to work or seek employment. This applies to single and married taxpayers. For married couples, both spouses must be working or looking for work unless one is a full-time student or incapable of self-care.

The child must typically be under 13 and claimed as a dependent. Exceptions exist for dependents who are physically or mentally incapable of self-care, regardless of age. The care provider cannot be a spouse, the child’s parent, or another dependent. Taxpayers must include the provider’s name, address, and taxpayer identification number on their return.

Filing Status for Divorced or Unmarried Parents

For divorced or unmarried parents, only the custodial parent—defined as the parent with whom the child resides most of the year—can claim child care expenses. In shared custody cases, the parent with the higher adjusted gross income (AGI) is generally considered the custodial parent. Clear custodial arrangements in divorce or separation agreements help prevent disputes.

The non-custodial parent may claim other tax benefits, like the child tax credit, if the custodial parent provides a written declaration using IRS Form 8332, which must be attached to the non-custodial parent’s tax return.

Children’s Residency Requirements

To qualify for deductions, the child must live with the taxpayer for more than half the tax year. Temporary absences for school or medical care do not affect residency status if the child returns to the primary home. In joint custody situations, the IRS evaluates factors like the child’s school and medical providers to determine residency. Parents should maintain records to support claims in case of an audit.

Expense Limits and Income Considerations

The IRS caps child care expenses at $3,000 for one child and $6,000 for two or more, excluding overnight camp costs. The child and dependent care tax credit ranges from 20% to 35% of allowable expenses, depending on AGI. Taxpayers with an AGI of $15,000 or less can claim the maximum 35%, while those with an AGI over $43,000 receive 20%.

Documentation Requirements

Proper documentation is crucial for claiming child care expenses. Taxpayers must provide receipts or statements from the care provider detailing the amount paid, dates of care, and services provided. The care provider’s identifying information must be included on Form 2441, submitted with the tax return. For those using flexible spending accounts (FSAs), documentation of contributions and disbursements is required. Employers typically issue year-end FSA statements summarizing activity.

Consequences of Double-Claiming

Double-claiming child care expenses can lead to serious consequences. If the IRS detects multiple claims for the same expenses, one return may be rejected, or an audit initiated. The parent improperly claiming the deduction may face penalties, including repayment with interest and fines. Coordination between parents and clear agreements on who will claim expenses can prevent these issues. Using IRS Form 8332 to allocate tax benefits is an effective way to avoid disputes.