The U.S. federal government has decided to cover a portion of the childcare expenses after discovering the high costs of daycare. In this article, read and find out if the daycare expenses are deducted from income taxes!
The U.S. federal government has decided to establish several options to cover a portion of childcare expenses after discovering the high costs of daycare. These options include the Dependent Care Tax Credit and Dependent Care Flexible Spending Accounts (DCFSA).
An article on MARCA states that in addition, several companies have also allowed employees to fund flexible spending accounts to be able to pay for childcare expenses. The funds are paid before taxes will be deducted, therefore, no contribution is subject to state, federal, or any withholding taxes for Social Security and Medicare.
Daycare Expenses on Tax Deductions 2023
An article on the TurboTax website states that with the Dependent Care Tax Credit, a taxpayer is allowed to deduct up to 35% of the eligible childcare expenses they have paid during the year. This maximum of 35% may also be tax deductions 2023 from the income. The taxpayers may also claim a maximum of $3,000 for one child and a maximum of $6,000 for two or more. These tax credits are non-refundable, hence, taxpayers who do not have a tax due that can be offset cannot receive a refund for the tax credits. However, to be eligible, a child must be disabled. Otherwise, a child must not be older than 13 years old to be able to receive the Dependent Care Tax Credit and the DCFSA.