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 are not eligible for the Child and Dependent Care Credit if 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 and percentage table to calculate the credit. The percentages are based on your Iowa net income on line 26. You must include a copy of your completed federal form 2441.
Child and Dependent Care Credit Worksheet
|1. Enter the amount from line 11 of federal form 2441||1.|
|2. If total of line 26 of the IA 1040, columns A and B, is:
Less than $10,000 enter 75%
|3. Multiply line 1 by percentage on line 2.
Enter the result here and on line 59 of the IA 1040.
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, IA 1040)
The ratio cannot exceed 100%.
Step 2. Multiply Step 1 above by the amount of credit calculated in the worksheet, line 3.
Step 3. Enter this amount on line 59 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 spouses 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 2014 for each dependent from the ages of three through five.
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 tenets, 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 spouses in the ratio of each spouse's net income to their combined net income. (Examples of how to prorate)