Although tax laws have certainly changed under the Tax Cut and Jobs Act, there are still numerous tax credits available. Some of these credits are obvious. But there are several you might be overlooking.
For example, did you hire or use a nanny throughout the year? Many high net worth individuals with kids employ nannies. If you’re one of them, then you could be eligible for the child and dependent care tax credit. With this credit you could qualify for as much as $1,050 for a child younger than 13. If you have more than one child, that number rises to $2,100.
However, be aware, if you’re hoping to qualify for this credit then everything has to be “on the level.” In other words, you must pay your nanny legally, as an employee, and remit the necessary employment taxes. If you’re paying your nanny under the table, then you won’t be able to qualify for this credit.
In order to be in compliance with the IRS, and be eligible to claim this credit, there are a few things you must do. You need to fill out a Form I-9, a Form W-4 and a Schedule H.
A Form I-9 is used to verify the identity and employment authorization of your nanny. A Form W-4 allows you to withhold federal income from your nanny. And a Schedule H shows how much you paid your nanny. It also shows how much you spent in applicable Medicare and social security taxes, and unemployment.
Once you have everything in order, you will likely qualify for the credit.