5. Deduct dependent care expenses
When you’re taking care of kids or elderly parents, the expenses can seriously affect your budget. Fortunately, some of those expenses are actually deductible. If you’re still working and you actually pay someone to take care of your kids or aging parents, you can minimize your tax liability and maximize your refund through the Child and Dependent Care Credit.
The Child and Dependent Care Credit is great, because just like the Child Tax Credit, this one is also subtracted from your final tax bill dollar for dollar, not deducted from your taxable income. There’s a trick though… In order to qualify, your kids must be younger than 13 and your elderly parents mentally or physically impaired.
According to IRS, you can claim up to $3,000 in expenses for one qualifying individual or $6,000 for two or more individuals. The actual amount of the credit is only a percentage of those costs, between 20 and 35 percent based on your one-year-income.
