Tax Facts about Summertime Child Care Expenses

Many parents who work or are looking for work must arrange for the care of their children during the school vacation.  If you are one of those parents, and your children requiring care are under 13 years of age, you may qualify for a child care tax credit. 

Here are some facts that you need to know about the tax credit available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the summer and throughout the rest of the year. You must claim the qualifying child for whom you pay care expenses as your dependent to qualify to claim the credit (but there is an exception for divorced or separated parents).

1. Day Camps - The costs of day camp generally count as expenses towards the child and dependent care credit.  A day camp or similar program may qualify, even though the camp specializes in a particular activity, such as soccer or computers. The rule that a dependent care center must comply with applicable state and local laws also applies to a day camp where more than six persons are cared for in return for a fee. 

2. Overnight Camp or Tutoring - No portion of the cost of an overnight camp or a tutoring program is a qualified expense.

3. School Expenses – Only school expenses for a child below the level of kindergarten will qualify for the credit.

4. Day Care Facility – The expenses paid for a day care center qualify.  If the day care center cares for more than six persons, it must comply with applicable state and local laws. 

5. In Home Care - If your child care provider is a “sitter” at your home, the sitter is considered your employee, and you may need to pay payroll taxes and file payroll returns.

6. Credit Percentage - The actual credit can be between 20 and 35 percent of your qualifying expenses, depending upon your income.  The higher your income, the lower the credit percentage.

7. Maximum Qualifying Expenses - You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit. This will provide a tax credit of between $600 and $1,050 for one child and $1,200 and $2,100 for two or more, depending upon your income.  If the expenses exceed your work earnings, use the earnings to figure the credit.  Dependent care benefits received through your employer will also affect the computation of the credit, and could result in no credit being allowed.

8. Records Required – To claim the credit on your tax return, you will need to provide the care provider’s name, address and tax ID number.  No credit is allowed without that information.  Where you have more than one child, you must also show the expenses paid for each child, up to the $3,000 maximum per child.  If your state allows a childcare credit, additional information, such as the care provider’s phone number, may be required.

For more information about how this credit will affect your particular circumstances, or for information about claiming this credit for your spouse or a dependent age 13 or over who is not able to care for him or herself, please call this office.

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