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What kind of tax credits can I take advantage of?

Here are the tax advantages you might qualify for as a household employer:

Flexible Spending Accounts (also known as Dependent Care Accounts): Most businesses allow their employees to contribute up to $5,000 of their pre-tax earnings to this type of account for childcare expenses, thus avoiding you Federal, state, and FICA taxes on that $5,000 of your income. Depending on your tax bracket, this can equate to a saving for you of between $2,100 and $2,300 annually.

Child Care Tax Credit: IRS Form 2441 enables you to claim a “Tax Credit for Child or Dependent Care” at the end of the calendar year if you don’t have access to the above Flexible Spending Account. This can save you $600 if yours is a family with one dependent, or $1,200 if with two dependents.

For Families with two or more dependents: If you are a family with two or more dependents, the government allows you to deduct up to $6,000 for dependent care. If you therefore already deducted $5,000 on your Flexible Spending Account, you can use IRS Form 2411 to claim the additional $1,000.

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