|
|
| Tax School Homepage |
| $159, then your child and dependent care expenses credit for both federal and California will both coincide at $159 each. This is due to the fact that the child and dependent care expenses credit is limited to your tax liability or otherwise a nonrefundable credit. |
| For example, Juan and Maria Escobedo are married and keep up a home for their two pre-school children. In tax year 2014, they claimed their children as dependents. Juan earned $25,200 and Maria earned $8,200. They paid $5,900 in work related child care expenses. Their child and dependent care expenses credit amount before taking into account any tax calculations is $738. |
| We are assuming here in this example that Juan and Maria Escobedo have a tax liability of more than the $738 for California and for federal this amount would be more. However, if their tax liability was $350 for California, their child and dependent care expenses credit could not be more than $350 for California. Also, if their tax liability for federal was $960, then their child and dependent care expenses credit could not be more than $960. Enough about refundable and nonrefundable credits. We think you already got the idea. California child and dependent care expenses credit was a refundable credit until January 1, 2011. After, the credit switched to be a nonrefundable credit. The refundable and nonrefundable credit idea also applies to other credits and it is not just restricted to the child and dependent care expenses credit. The Earned Income credit for example is a refundable credit and if you already exhausted your tax liability, you get whatever is left over as a refund and therefore whatever is left over is "refundable" to you. |
| To claim the Child and Dependent Care Expenses Credit for California, you must complete and attach FTB Form 3506 to your California tax return. |
| Remember schedule 3 for claiming child and dependent care expenses for federal on Form 1040A? You can't use this schedule anymore. To claim the child and dependent care expenses credit on your federal tax return your only option now is to prepare your child and dependent care expenses credit on Form 2441. To claim the child and dependent care expenses credit on your your California, you need to use FTB Form 3506 and then attach it to you California form 540 to claim the California child and dependent care expenses credit for California. And talking about discontinued tax forms, we don't have form 540A anymore since this form was discontinued for tax years after 2013. |
| In tax year 2014, if your gross income is $45,000 and your federal child and dependent care expenses credit amount was $480, then your California Credit is $206. |
| For Federal the Child and Dependent care expenses credit is a non-refundable credit and for California the credit is also nonrefundable. It used to be that the credit was a refundable credit for California, but recently the rules were changed and now the credit is nonrefundable just like the federal child and dependent care credit. |
|
The percentage of the federal Child and Dependent Expenses Care credit that is allowed for California for taxpayers who earned more than $90,000 in 2014 is 34%. |
| If your income is $40,000 or less, the percentage is 50 percent. If your income is over $40,000 but less than $70000, the percentage of the federal credit is 43 percent and from over $70,000 to $100,00 it is 34 percent. So remember, first you figure out the federal child and dependent care expenses credit amount and then take a percentage of that credit. Your California child and dependent care expenses credit depends on the amount you calculate for federal tax purposes. Therefore, get IRS form 2441 and do the calculations there first, then get FTB form 3506 and do the calculations there to arrive at the California credit amount. |
| Copyright © 2014 [Hera's Income Tax School]. All Annual Federal Tax Refresher Course rights reserved. |
| Revised: 07/09/15 |
| 37 |
| Back to Tax School Homepage |
