How to claim child care credit on taxes and can you write off bus expenses to travel to work?

Question

I just got a new job and had a baby. I go back to work Monday and I am now taking a bus to get to the city 2.25 each way so 4.50 a day and I pay 675 a month for childcare 4 days a week.

Can you write these things off in your taxes so it is like money you never made. Example if I pay 1200 a year for the bus ride is it like I made 30,000 instead of 31,200 if that is the situation. And the same thing for the daycare, can you write it off so it is like i made 20,000 instead of 30,000 if I paid 10,000 for a year of daycare? I get a receipt for daycare but not for the bus? Thank you any help is greatly appreciated.

At work they have this account where they can take money out and pay your daycare and it is like money you never made but it is complicated and if you don't use it you lose it and I would just rather do it in my taxes if possible if it is the same scenio.

Thanks

I live in PA thanks everyone

Answer 1

Your bus expenses are not deductible, sorry.

You have two choices regarding child care.

First, you can pay the childcare out of pocket. Then when you file your taxes, attach Form 2441 Child and Dependent Care Credit. You will get a credit of between 20% and 35% of the first $3,000 of child care expenses against taxes that you owe.

Your other option is to have your employer reduce your pay and use that amount toward child care. You will not pay any income taxes on this money. You are allowed to reduce your pay up to $5,000.

Which option you choose depends on several factors. For example, if your income is low enough so that you will not owe income taxes, then the first option does not benefit you. You are probably better off taking the second option.

At the other extreme, if your income is high and you qualify for the minimum credit of 20% of $3,000, or a tax credit of $600, then the second option is going to be better for you since your tax bracket is higher than 20%.

If you can do a mock tax return for 2007, you will see which option is more beneficial for you. If you use the second option and reduce your income, this may have an effect on other credits such as the Child Tax Credit or Earned Income Credit. So do those mock returns.

At first glance, it seems that the second option may be better for you, since your expenses are going to be much more than $3,000. The credit only applies to the first $3,000, but the dependent care benefit taken out of your paycheck can be as high as $5,000.

Answer 2

The cost of commuting to work is never deductible, but some employers will allow you to have money set aside from your pay to pay for public transit or parking. (Transit Chek is a big provider of this benefit.)

You can get a credit for children under the age of 13, but it appears that the maximum credit is less than taxes on the $8,100 you mention. If you are afraid of losing the money in a pre-tax plan, you can have slightly less than you need withheld from your pay and make up the remaining amount. The childcare credit is calculated on Form 2441. The maximum amount of childcare used is $3,000. The percentage of the credit is based on your income. If you make $30,000 the amount of credit you would get is $3,000 * .27 = $810. Even if you are only in the 15% tax bracket for federal taxes, you would save $1,215 if you use your employer's plan.

You didn't mention what state(s) you live and/or work in, so I couldn't address the state tax implications.

Pennsylvania doesn't have a tax credit for child care expenses.

Answer 3

Daycare expenses are a credit on your federal taxes. Technically not a deduction but there is a tax benefit. See Form 2441. For one child, the maximum credit is between $600 and $900 depending on your income. So, of the $8000 you will be paying for daycare, you will only get back $600 or so.

Expenses commuting back and forth to work are never deductible. We all have to get to work somehow. It is just more expensive for some.

Answer 4

Above answers are for federal. In PA for state taxes there is no deduction for child care expenses.