The Minnesota child and dependent care credit helps to offset expenses paid to someone who cared for your child (or other qualifying person) while you worked or looked for work. You must meet certain qualifications to claim this refundable credit. If you qualify, you’ll need to file Schedule M1CD with your Minnesota income tax return.Topics include:Qualifications You may qualify for the Minnesota child and dependent care credit by meeting all of the federal requirements and the additional state requirements outlined below. 1. The care must be for one or more qualifying persons.
2. You (and your spouse if married) must have earned income (see exception under #7 below).
3. Qualifying expenses must have been incurred so you (and your spouse if married) could work or look for work (see exception under #7 below).
4. You must identify on the schedule the person or organization who provided the care, including Social Security number or federal business ID number.
5. Filing status must be married filing joint, single, head of household, or qualifying widow(er). Taxpayers using the married filing separate filing status do not qualify.
6. Minnesota only: Household income must be $36,980 or less for 2009.
7. You must meet at least one of the following:
- You paid someone for child or dependent care assistance. If the care giver is your child, that child must not be your dependent, and s/he must be age 19 or older by the end of the year;
- Minnesota only: You ran a licensed family daycare program and provided care for your child who was younger than age six at the end of the year; or
- Minnesota only: You had or adopted a child born during the current tax year, were married filing a joint return, and did not participate in a pre-tax dependent care assistance program. You may qualify even if you did not have actual child care expenses or if only one spouse had earned income.)
Note:
Household income refers to the same taxable and nontaxable income sources used to calculate the property tax refund. However, for the refundable credits, (child care credit and education credit) household income includes only the income of the taxpayer and the taxpayer’s spouse (if filing jointly). Nontaxable income sources include welfare benefits, employee contributions to IRAs, 401Ks, etc, and the excluded gain on the sale of a home. For a more complete list of income sources to include, see household income.
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Other Minnesota requirements
Part-year, nonresidents and American Indians
The child and dependent care credit is based on earned income taxable to Minnesota. Therefore, you must prorate your credit if you are:
- a part-year resident or nonresident,
- eligible to claim a subtraction for reservation income, or
- claimed a subtraction for income from operating a qualified business in a Job Opportunity Building Zone.
The calculation is found on Schedule M1CD.
No credit for deceased taxpayer
Although this is a refundable credit, the taxpayer must be alive when filing for the credit. If the taxpayer dies after filing for the credit, the credit will be paid to a member of the household. If the taxpayer dies before filing, no credit will be allowed on the final return.
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Qualifying person
A qualifying person is the same as for the federal credit for child and dependent care expenses and must have lived with you for more than one-half of the year (provided the relationship did not violate state law).
A qualifying person is:
- Your dependent child younger than age 13 when the care was provided, or
- Your spouse or dependent who is physically or mentally unable to care for him or herself.
Exceptions to qualifying person
- If you were divorced, legally separated or lived apart from your spouse during the last six months of the year and your child is not your dependent, you may take the Minnesota credit if your child meets the requirements of a qualifying person for the federal credit for child and dependent care expenses. In this case, the other parent cannot treat the child as a qualifying person.
- When determining whether or not a qualifying person can be claimed as a dependent, Minnesota does not require taxpayers to include welfare or public assistance payments for the support test. For the Minnesota credit, a child may be a dependent even though that child did not qualify for the credit as a result of welfare benefits received.
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Expenses that qualify
Qualified expenses are amounts paid for household services and care of the qualifying person while you (and your spouse, if filing a joint return) worked or looked for work.
The expenses that qualify for the state credit are the same as expenses that qualify for the federal credit. These include amounts paid to daycare providers for the care of a child. Generally, this will not include amounts paid for food, clothing, education, or entertainment. However, if these costs are incidental to, and cannot be separated from, the child care costs, they may be included.
Payments made for you by another person or agency do not qualify.
The maximum amount of qualifying expenses you may claim is $3,000 for one child and $6,000 for two or more children.
See Child and Dependent Care Credit in IRS publication 17 for further details.
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Child born during the tax year
Married taxpayers filing joint returns are allowed a credit for a baby born during the tax year, if they did not participate in a pre-tax dependent care assistance program. They may be eligible even if they did not have actual child care expenses or if only one spouse had earned income.
You are deemed to have paid the lesser of the following amounts (regardless of how much may have actually been paid):
- $3,000 (regardless of whether the taxpayer has one or more babies born in the tax year), or
- Your combined earned income.
Use the worksheet in the M1CD instructions to determine the correct amount of the credit, and check the box on the M1CD to indicate that you are claiming the credit for a baby born during the tax year.
You will be required to complete a "mock" federal Form 2441 in order to complete this worksheet.
MN-2441
If you are filing electronically, the department has created Form MN-2441 to replace the mock federal form.
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Licensed family daycare
Licensed family daycare providers who care for their own child (under the age of six at the end of the tax year) in their home, qualify for the child care credit. Since the family will have no out-of-pocket expenses, the taxpayer is deemed to have paid:
- $3,000 of qualifying expenses if the child was 16 months or younger at the end of the tax year ($6,000 if there are two or more children age 16 months or younger).
- The amount the provider would have charged for a child of the same age for the same number of hours if the child was older than 16 months, but younger than six years old, at the end of the tax year, up to a maximum of $3,000 for one child or $6,000 for two or more qualifying children.
Check the box on Schedule M1CD to indicate that you are a licensed daycare provider caring for your own child(ren) and provide your daycare license number.
MS 290.067
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