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65. CHILD
AND DEPENDENT CARE CREDIT OR EARLY CHILDHOOD
DEVELOPMENT TAX CREDIT.
Only one of the following two credits may be taken:
- Child and Dependent Care Credit OR
- Early Childhood Development Tax Credit.
Only taxpayers with a net income of less than $45,000 are eligible to take one of these credits. If you are married, your net income and the net income of your spouse must be combined to determine if you qualify, even if your spouse does not file an Iowa return.
These credits are refundable. Even though you may not be required to file an Iowa return, you may wish to do so in order to claim a refund for one of these credits. You may be eligible for the Child and Dependent Care Credit even though you were unable to take it on your Federal return.
CHILD AND DEPENDENT CARE CREDIT
If you are choosing the Child and Dependent Care Credit, use the following worksheet to calculate the credit.
Use the following worksheet and percentage table to calculate the Child and Dependent Care Credit. The percentages are based on your Iowa net income on line 26. You must attach a copy of your completed Federal form 2441 or Schedule 2 of Federal 1040A.
CHILD AND DEPENDENT CARE CREDIT WORKSHEET
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1. Enter the amount from line 9 of Federal form 2441 or line 9 of Schedule 2 of Federal form 1040A. Note: Use the Child Care Credit prior to any Federal Alternative Minimum Tax calculation. 1. |
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2. If total of line 26 of the IA1040, columns A and B, is:
Enter the appropriate percent here 2. |
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3. Multiply line 1 by percentage on line 2. 3. |
Nonresidents and part-year residents
The Child and Dependent Care Credit must be adjusted using the following steps:
Step 1. Divide Iowa net income (line 26, IA 126) by all-source net income of you and spouse (line 26, IA1040)
Step 2. Multiply Step 1 above by the amount of credit calculated in the worksheet, line 3.
Step 3. Enter this amount on line 65 of the IA 1040.
Married Separate Filers: In computing the credit, the combined net income of both spouses must be used. The credit must be divided between husband and wife in the ratio of each spouse’s net income to their combined net income.
EARLY CHILDHOOD DEVELOPMENT CREDIT
If you are choosing the Early Childhood Development Tax Credit, you may take the credit equal to 25% of the first $1,000 of qualifying expenses paid in 2006 for each dependent from the ages of three through five.
For the 2006 calendar year only, expenses incurred in November and December of 2005 may be included with the 2006 expenses.
Expenses that qualify include the following:
- Services provided by a preschool, as defined in Code section 237A.1
- Books that improve child development, such as textbooks, music and art books, teacher’s editions and reading books
- Instructional materials required to be used in a lesson activity, such as paper, notebooks, pencils and art supplies
- Lesson plans and curricula
- Child development and educational activities outside the home, such as drama, art, music and museum activities and the entrance fees for such activities
Early childhood development expenses that do NOT qualify include:
- Food, lodging, or membership fees relating to child development and educational activities outside the home
- Services, materials, or activities for the teaching of religious tenets, doctrines, or worship, if the purpose of these expenses is to instill those tenants, doctrines or worship
Nonresidents and part-year residents
No adjustment is required to the Early Childhood Development Tax Credit.
Married Separate Filers: In computing the credit, the combined net income of both spouses must be used. The credit must be divided between husband and wife in the ratio of each spouse’s net income to their combined net income.