EXCERPTS FROM INSTRUCTIONS OF IRS FORM 2441
If you paid someone to care for your child or other qualifying person so you (and your spouse if filing a joint return) could work or look for work in 1997, you may be able to take the credit for child and dependent care expenses. But you must have had earned income to do so. If you can take the credit, use Form 2441 to figure the amount of your credit.
If you received any dependent care benefits for 1997, you MUST use Form 2441 to figure the amount, if any, of the benefits you may exclude from your income on Form 1040, line 7. You must complete Part III of Form 2441 before you can figure the credit, if any, in Part II.
Definitions
Dependent Care Benefits
These include amounts your employer paid directly to either you or your care provider for the care of your qualifying person(s) while you worked. These benefits also include the fair market value of care in a day-care facility provided or sponsored by your employer. Your salary may have been reduced to pay for these benefits. If you received dependent care benefits, they should be shown in box 10 of your 1997 W-2 form(s).
Qualifying Person(s)
A qualifying person is:
Any child under age 13 whom you can claim as a dependent (but see Exception for Children of Divorced or Separated Parents on this page). If the child turned 13 during the year, the child is a qualifying person for the part of the year he or she was under age 13.
Your disabled spouse who is not able to care for himself or herself.
Any disabled person not able to care for himself or herself whoM you can claim as a dependent (or could claim as a dependent except that the person had gross income of $2,650 or more). but if this person is your child, see Exception for Children of Divorced or Separated Parents on this page.
To find out who is a dependent, see Pub. 501, Exemptions, Standard Deduction, and Filing Information.
Caution: To be a qualifying person, the person must have shared the same home with you in 1997.
Exception for Children of Divorced or Separated Parents. If you were divorced, legally separated, or lived apart from your spouse during the last 6 months of 1997, you may be able to take the credit or the exclusion even if your child is not your dependent. If your child is not your dependent, he or she is a qualifying person only if all five of the following apply.
1. You had custody of the child for a longer time in 1997 than the other parent. See Pub. 501 for the definition of custody.
2. One or both of the parents provided over half of the child's support in 1997.
3. One or both of the parents had custody of the child for more than half of 1997.
4. The child was under age 13 or was disabled and could not care for himself or herself.
5. The other parent claims the child as a dependent because--
As the custodial parent, you signed Form 8332 or a similar statement agreeing not to claim the child's exemption for 1997, or
Your divorce decree or written agreement went into effect before 1985 and it states that the other parent can claim the child as a dependent, and the other parent gave at least $600 for the child's support in 1997. But this rule does not apply if your decree or agreement was changed after 1984 to say that the other parent cannot claim the child as a dependent.
If this exception applies, the other parent cannot treat the child as a qualifying person even though the other parent claims the child as a dependent.
Qualified Expenses
These include amounts paid for household services and care of the qualifying person while you worked or looked for work. Child support payments are not qualified expenses. Also, expenses reimbursed by a state social service agency are not qualified expenses unless you included the reimbursement in your income.
Household Services. Theses are services needed to care for the qualifying person as well as to run the home. They include, for example, the services of a cook, maid, baby-sitter, housekeeper, or cleaning person if the services were partly for the care of the qualifying person. Do not include services of a chauffeur or gardener.
You may also include your share of the employment taxes paid on wages for qualifying child and dependent care services.
Care of the Qualifying Person. Care includes the cost of services for the qualifying person's well-being and protection. It does not include the cost of clothing or entertainment.
You may include the cost of care provided outside your home for your dependent under age 13 or any other qualifying person who regularly spends at least 8 hours a day in your home. If the care was provided by a dependent care center, the center must meet all applicable state and local regulations. A dependent care center is a place that provides care for more than six persons (other than persons who live there) and receives a fee, payment or grant for providing services for any of those persons, even is the center is not run for profit.
You may include amounts paid for items other than the care of your child (such as food and schooling) only if the items are incidental to the care of the child and cannot be separated from the total cost. But do not include the cost of schooling for a child in the first grade or above. Also, do not include any expenses for sending your child to an overnight camp.
Medical Expenses. Some disabled spouse and dependent care expenses may qualify as medical expenses if you itemize deductions on Schedule A. See Pub. 503, Child and Dependent Care Expenses, and Pub. 502, Medical and Dental Expenses, for details.