Tax Information
Federal Tax Credits:
Child and Dependant Care Tax Credit
Helps families pay for child care for children under the age of 13, if the parents are working, or looking for work. Parents who are full time students can also claim the credit. Qualifying care includes child care centers, family child care homes, and care provided by paid friends or relatives, as long as the relative is not a dependant of the taxpayer. The size of the credit depends on the number of children in care, your family income, and the amount you paid for child care during the tax year. There are limits on the credit given for one child, and two or more children.
Earned Income Tax Credit
A refundable tax credit for low and moderate income families, particularly those with children. The EITC is based on family income and the number of children in the family. Both single and two parent families are entitled to the credit, as long as one parent is employed. A number of states have their own EITC; check your state department of revenue for more information.
State Tax Credits:
Twenty four states have tax programs related to the Child and Dependant Care Credit. Check with your state department of revenue for more information. In Maine, parents can receive a double child care tax credit if the family has their child enrolled in a quality child care program. Families should check with their child care provider to see if they have a “Quality Certificate” issued by the Department of Human Services.
In-Home Care or Nanny Tax
When you hire an in-home caregiver, you become an employer under federal law. You need to be aware of laws regarding taxes, verification of employment eligibility, and minimum wage. For information on these topics, contact the Department of Labor, the Internal Revenue Service, an accountant, a tax advisor, or an insurance agent.
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