How to Claim the Wisconsin Child Care Tax Credit
Understand the process for claiming the Wisconsin child care credit, a state benefit that works with the federal credit to lower your tax liability.
The Wisconsin child and dependent care credit provides a tax benefit for working families, helping to reduce the financial burden of care expenses. This state-level credit is designed to supplement the similar federal credit, allowing eligible Wisconsin taxpayers to further decrease their state income tax liability.
Determining Your Eligibility
To claim the Wisconsin child and dependent care credit, you must first meet several requirements related to your residency, filing status, and income. You must be a full-year or part-year resident of Wisconsin for the tax year in which you are claiming the credit. If you are married, you generally must file a joint return with your spouse to be eligible. The purpose of the care expenses must be to enable you and your spouse to work or actively seek employment.
Qualifying Child Requirements
The child must be your qualifying child and under the age of 13 at the time the care was provided. This age limit is waived if the dependent, regardless of age, is physically or mentally incapable of self-care and lived with you for more than half the year. This includes your spouse or any other individual who meets the dependency tests.
Qualifying Care and Provider Requirements
The expenses must be for the well-being and protection of the qualifying individual. The care provider must be licensed, certified, or registered as required by state law. You cannot claim expenses paid to your spouse, the child’s parent, or anyone you claim as a dependent on your tax return.
Calculating the Credit Amount
The calculation of the Wisconsin credit is directly linked to the federal Child and Dependent Care Credit. Taxpayers must first complete federal Form 2441, Child and Dependent Care Expenses, to determine the amount of their federal credit. This dependency means that if you are not eligible for the federal credit, you generally cannot claim the Wisconsin credit.
For tax years beginning after December 31, 2023, Wisconsin allows for a more generous calculation than the federal credit. The state credit is equal to 100 percent of the federal credit you would be able to claim using higher state-level expense limits. For Wisconsin purposes, the maximum amount of qualified expenses you can use is $10,000 for one qualifying person and $20,000 for two or more qualifying persons. This is an increase over the federal limits of $3,000 and $6,000, respectively.
The amount of the credit you receive can be influenced by your income. While the state allows a credit of up to 100% of the recalculated federal amount, this is a nonrefundable credit. A nonrefundable credit can reduce your Wisconsin income tax liability to zero, but you will not receive any portion of the credit back as a refund if it exceeds your total tax bill.
Required Information and Forms
You will need the name, address, and Taxpayer Identification Number (TIN) for each care provider you used throughout the year. The TIN can be a Social Security Number (SSN) for an individual provider or an Employer Identification Number (EIN) for a business. You will also need the name and SSN for each qualifying child or dependent.
The two primary forms for this credit are federal Form 2441 and Wisconsin Schedule CC, Child and Dependent Care Credit. Even if you cannot claim a federal credit, you may need to complete Form 2441 to establish the basis for your Wisconsin credit calculation. Schedule CC is the specific Wisconsin form where you will report your qualifying expenses and calculate the final state credit amount.
When completing Wisconsin Schedule CC, you will transfer information from your federal form and the provider details you collected. You will then use the state-specific expense limits of $10,000 or $20,000 to determine your allowable expenses before calculating the final credit amount that will be carried to your main state tax return.
How to Claim the Credit
The completed Schedule CC must be attached to your Wisconsin Form 1, the individual income tax return. The total credit amount calculated on Schedule CC is then entered on the designated line on Form 1 to reduce your overall tax liability.
If you use tax software to e-file your return, the program will handle attaching Schedule CC to your Form 1 automatically after you have entered all the necessary information. For those who file by mail, you must physically include the printed Schedule CC with your completed Form 1 and any other required schedules when you mail them to the Wisconsin Department of Revenue.