The so-called “child-care” credit is really a dependent-care tax credit that can apply to any dependent. To qualify, you must hire someone to take care of a child or an incapacitated parent so that you can go to work.
You generally can take a 20% credit on up to $2,400 worth of money you spend on dependent care, for as much as $480 in annual tax savings. If you hire someone to care for two people, the 20% credit can be applied to $4,800 in expenses, for a maximum tax savings of $960. The new tax law will raise the $2,400 and $4,800 limits to $3,000 and $6,000, respectively, in 2002, so the tax savings may be as great as $600 or $1,200 per year.
Despite its name, you can claim this credit even if you don’t take a parent as a dependent. In addition to spending money on care for your parent, as described above, you must provide over half of a parent’s living expenses.
