Significant changes came for the dependent care tax credit in 2021.
What you need to know:
-tax law changes apply to 2021 only
-abode rule for 1/2 year in US
-dependent care qualification rules stay the same
-tax credit becomes refundable
-care costs increased to $8,000 for one child and $16,000 for a second
-credit is a huge 50% of care costs for an adjusted gross income (AGI) of up to $125,000
-20% tax credit for AGI’s ranging from $185,000 to $400,000
-credit will zero at AGI’s at $440,000
-FSA contribution goes from $5,000 to $10,500
