Dependent Care Benefits

irs.gov - [PDF]

Dependent Care Benefits

Dependent care benefits include:

  1. Amounts your employer paid directly to either you or your care provider for the care of your qualifying person(s) while you work,

  2. The fair market value of care in a daycare facility provided or sponsored by your employer, and

  3. Pre-tax contributions you made under a dependent care flexible spending arrangement.

Exclusion or deduction. If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. Your employer can tell you whether your benefit plan qualifies. To claim the exclusion, you must complete Part III of Form 2441, Child and Dependent Care Expenses. You cannot use Form 1040EZ.

If you are self-employed and receive benefits from a qualified dependent care benefit plan, you are treated as both employer and employee. Therefore, you would not get an exclusion from wages. Instead, you would get a deduction for the dependent care benefits. To claim the deduction, you must use Form 2441.

The amount you can exclude or deduct is limited to the smallest of:

  1. The total amount of dependent care benefits you received during the year,

  2. The total amount of qualified expenses you incurred during the year,

  3. Your earned income,

  4. Your spouse's earned income, or

  5. $5,000 ($2,500 if married filing separately).

Statement for employee. Your employer must give you a Form W-2 (or similar statement), showing in box 10 the total amount of dependent care benefits provided to you during the year under a qualified plan. Your employer will also include any dependent care benefits over $5,000 in your wages shown on your Form W-2 in box 1.

Qualifying person(s). A qualifying person is:
  • A qualifying child who is under age 13 whom you can claim as a dependent. If the child turned 13 during the year, the child is a qualifying person for the part of the year he or she was under age 13.

  • Your disabled spouse who is not physically or mentally able to care for himself or herself.

  • Any disabled person who was not physically or mentally able to care for himself or herself whom you can claim as a dependent (or could claim as a dependent except that the person had gross income of $3,800 or more or filed a joint return).

  • Any disabled person who was not physically or mentally able to care for himself or herself whom you could claim as a dependent except that you (or your spouse if filing jointly) could be claimed as a dependent on another taxpayer's 2012 return.

For information about excluding benefits on Form 1040, Form 1040NR, or Form 1040A, see Form 2441 and its instructions.