Special rule for children of divorced or separated parents.   Even if you cannot claim your child as a dependent, he or she is treated as your qualifying person if:

  The noncustodial parent cannot treat the child as a qualifying person even if that parent is entitled to claim the child as a dependent under the special rules for a child of divorced or separated parents.

These 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, babysitter, 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 can also include your share of the employment taxes paid on wages for qualifying child and dependent care services.

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 can 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 if the center is not run for profit.

You can 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 kindergarten or above. You can include the cost of a day camp, even if it specializes in a particular activity, such as soccer. But do not include any expenses for sending your child to an overnight camp.

Some disabled spouse and dependent care expenses may qualify as medical expenses if you itemize deductions on Schedule A (Form 1040). However, you cannot claim the same expense as both a dependent care expense and a medical expense. See Pub. 502, Medical and Dental Expenses, and Pub. 503 for details.

You can show a serious and earnest effort (due diligence) to get the information by keeping in your records a Form W-10 completed by the care provider. Or you may keep one of the other sources of information listed in the instructions for Form W-10. If the provider does not give you the information, complete the entries you can on
line 1. For example, enter the provider's name and address. Enter “See Page 2” in the columns for which you do not have the information. Then, on the bottom of page 2, explain that the provider did not give you the information you requested.

Enter the care provider's name and address. If you were covered by your employer's dependent care plan and your employer furnished the care (either at your workplace or by hiring a care provider), enter your employer's name in column (a). Next, enter “See W-2” in column (b). Then, leave columns (c) and (d) blank. But if your employer paid a third party (not hired by your employer) on your behalf to provide the care, you must give information on the third party in columns (a) through (d).

If the care provider is an individual, enter his or her social security number (SSN). Otherwise, enter the provider's employer identification number (EIN). If the provider is a tax-exempt organization, enter “Tax-Exempt” in column (c).

Enter the total amount you actually paid in 2006 to the care provider. Also, include amounts your employer paid to a third party on your behalf. It does not matter when the expenses were incurred. Do not reduce this amount by any reimbursement you received.

Enter each qualifying person's name.

You must enter the qualifying person's SSN. Be sure the name and SSN entered agree with the person's social security card. Otherwise, at the time we process your return, we may reduce or disallow your credit. If the person was born and died in 2006 and did not have an SSN, enter “Died” in column (b) and attach a copy of the person's birth certificate.

To find out how to get an SSN, see Social Security Number (SSN) on page 16 of the Form 1040 instructions or Identifying number on page 8 of the Form 1040NR instructions. If the name or SSN on the person's social security card is not correct, call the Social Security Administration at 1-800-772-1213.

Enter the qualified expenses you incurred and paid in 2006 for the person listed in column (a). Prepaid expenses are treated as paid in the year the care is provided. Do not include in column (c) qualified expenses:

If you paid qualified expenses for the care of two or more qualifying persons, the $6,000 limit does not need to be divided equally. For example, if you paid and incurred $2,500 of qualified expenses for the care of one qualifying person and $3,500 for the care of another qualifying person, you can use the total, $6,000, to figure the credit.

If you are filing a joint return, disregard community property laws. If your spouse died in 2006, see Pub. 503. If your spouse was a student or disabled in 2006, see the instructions for line 5.

Your spouse was a student if he or she was enrolled as a full-time student at a school during any 5 months of 2006. A school does not include an on-the-job training course, correspondence school, or a school offering courses only through the Internet. Your spouse was disabled if he or she was not capable of self-care. Figure your spouse's earned income on a monthly basis.

For each month or part of a month your spouse was a student or was disabled, he or she is considered to have worked and earned income. His or her earned income for each month is considered to be at least $250 ($500 if more than one qualifying person was cared for in 2006). If your spouse also worked during that month, use the higher of $250 (or $500) or his or her actual earned income for that month. If, in the same month, both you and your spouse were either students or disabled, only one of you can be treated as having earned income in that month.

For any month that your spouse was not a student or disabled, use your spouse's actual earned income if he or she worked during the month.

Special rules may apply for people who had to relocate because of Hurricane Katrina, Rita, or Wilma. See Pub. 4492 for details.

If you had qualified expenses for 2005 that you did not pay until 2006, you may be able to increase the amount of credit you can take in 2006. To figure the credit, see the worksheet under Amount of Credit in Pub. 503. If you can take a credit for your 2005 expenses, enter the amount of the credit and “CPYE” on the dotted line next to line 9. Also, enter the name and social security number of the person for whom you paid the prior year's expenses to the right of this amount. Then, add the credit to the amount on line 9 and replace the amount on line 9 with that total. Also, attach a statement showing how you figured the credit.

Example.   Under your employer's dependent care plan, you chose to have your employer set aside $5,000 to cover your 2006 dependent care expenses. The $5,000 is shown in
box 10 of your Form W-2. In 2006, you incurred and were reimbursed for $4,950 of qualified expenses. You would enter $5,000 on line 12 and $50, the amount forfeited, on line 14. You would also enter $50 on line 14 if, instead of forfeiting the amount, your employer permitted you to carry the $50 forward to use during the grace period in 2007.

Example.   You received $2,000 in cash under your employer's dependent care plan for 2006. The $2,000 is shown in box 10 of your Form W-2. Only $900 of qualified expenses were incurred in 2006 for the care of your 5-year-old dependent child. You would enter $2,000 on
line 12 and $900 on line 16.

If you are filing a joint return, disregard community property laws. If your spouse died in 2006, see Pub. 503. If your spouse was a student or disabled in 2006, see the instructions for line 5.