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- 1). Confirm that you meet all the required tests to determine that you qualify for the credit. The tests that you must pass include the qualifying person test, the earned income test, the work-related expense test, the joint return test and the provider identification test.
- 2). Determine the amount of work-related expenses you paid for child or dependent care through Dec. 31 of the tax year. Do not include any amounts that were reimbursed by a state social services agency. Certain medical expenses may also qualify for either the child and dependent care credit or as deductible medical expenses but not both.
- 3). Calculate your earned income for the year. You may exclude any dependent care benefits you received, such as amounts paid by your employer directly to your provider, from your earned income.
- 4). Check your actual expenses against the current dollar limits set by the Internal Revenue Service. Each year there is a "cap" to the amount of expenses that you may use to calculate the credit. For instance, for the tax year 2009 the limit was $3,000 for one qualifying person or $6,000 for two or more.
- 5). Multiply your work-related expenses by the appropriate percentage. The percentage is based on your adjusted gross income.
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