The $8,000 Child Stimulus Credit that Few Americans Know About
Families with two children who spent at least $16,000 on day care in 2021 can get thousands of dollars back from the IRS if they meet other qualifications.
Forget about the $1,400 stimulus checks or $300 payments for each child via the enhanced child tax credit. If financially struggling Americans could tap into this one particular stimulus credit, all of those other government-issued payments might seem like pocket change.
This fully refundable stimulus credit that many Americans might not be aware of is called the Child and Dependent Care Tax Credit, which was green-lighted via President Joe Biden’s American Rescue Plan last spring. And if all eligibility requirements are met, one could take home a whopping $8,000.
“The expanded tax break lets families claim a credit worth 50 percent of their child care expenses, which can be up to $16,000 for two or more kids,” writes Aimee Picchi at CBS News.
“In other words, families with two kids who spent at least $16,000 on day care in 2021 can get $8,000 back from the IRS through the expanded tax credit,” Picchi writes, adding that before the passage of the American Rescue Plan, “parents could only claim 35 percent of a maximum of $6,000 in child care expenses for two children, or a maximum tax credit of $2,100.”
To be eligible for the credits, the IRS states that you must have “a child under the age of 13 who is your dependent” and “a spouse or dependent of any age who can’t care for themselves and who lives with you for more than six months of the year.”
There are specific income thresholds that have to be met as well.
“The credit percentage is reduced by 1 percentage point for every $2,000 of adjusted gross income for people earning more than $125,000. That means someone with $127,000 in income would be able to claim 49 percent of their child care expenses, for example,” Picchi writes.
“Families earning more than $183,000 are capped at taking 20 percent of their child care expenses. But the credit is completely phased out for families earning more than $428,000,” she adds.
How to Land the Credits
When filing their taxes, parents should make sure to have in hand all receipts, forms, or documents outlining how much was spent directly on child care—which could include day care services and related transportation costs. They also need to complete Form 2441 and attach it to their tax return before sending it off.
“You must identify all persons or organizations that provided care for your child, dependent, or spouse,” the IRS writes on its website.
“To identify the care provider, you must give the provider’s name, address, and taxpayer identification number (TIN),” it adds.
Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.