If you paid someone to care for a qualifying individual in order to work or look for work, you may be able to claim the credit for child and dependent care expenses. If you are married, both you and your spouse must have earned income, unless one spouse was either a full-time student or was physically or mentally incapable of self-care. The expenses you paid must have been for the care of one or more of the following qualifying individuals:

1. A child under age 13 whom you can claim as a dependent or whom you could have claimed as a dependent if you had not granted the exemption to a non-custodial parent in a written agreement or decree of divorce or separate maintenance, or by a signed Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents,
2. Your spouse who is mentally or physically unable to care for himself or herself; or
3. Any dependant who was physically or mentally not able to care for himself or herself, and for whom you can claim an exemption (or could claim an exemption except if the person had $2,700 or more of gross income).

To take the credit, you must meet all the following conditions:

1. You must have earned income during the year, except in the circumstances described earlier if you are married,
2. The qualifying person must have lived with you in a home kept up by you, and
3. You must qualify for a filing status other than married filing separately,
4. The expenses you pay must be for the qualifying individual's care so you can work or look for work.
5. The payments in number 4, cannot be paid to someone who is your dependent, or child who is under age 19.

If you qualify for the credit, use Schedule 2 of Form 1040A, or Form 2441 with Form 1040. If you received dependent care benefits from your employer (this amount should be shown in box 10 of your 1998 Form W-2), you must complete part III of Schedule 2 (Form 1040A) or Form 2441. You cannot use Form 1040EZ if you claim the child and dependent care credit. You must report the name, address, and taxpayer identification number, (either the social security number, or the employer identification number) of the care provider on your return. You can use Form W-10, Dependent Care Provider's Identification and Certification, to request this information from the care provider.

The credit is a percentage, based on your adjusted gross income, of the amount you paid someone to care for the qualifying person. You may use up to $2,400 of the expenses paid in a year for one qualifying person, or $4,800 for two or more qualifying persons. These amounts must be reduced by the amount of any dependent care provided by your employer. See Publication 503, Child and Dependent Care Expenses, for additional information.

If you pay someone to look after your dependent or spouse in your home, you may be a household employer. If you are, you may have to withhold and pay social security and Medicare tax and pay federal unemployment tax. For information on this subject, see Publication 926, Household Employer's Tax Guide, or select Topic 756 and Topic 760.

For additional information on the Child Tax Credit refer to Publication 17, Your Federal Income Tax.

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