With
summer break just around the corner, child care costs will be
increasing for many working parents. This added expense during the
summer has many parents significantly less excited about school being
out than their little ones are. If this is the case with you, the Child and
Dependent Care Tax Credit may be able to help. This federal tax credit
provides a possible means for you to reduce your tax burden during the
summer months and throughout the year by claiming child care expenses on
your tax return. In a recent newsletter, the IRS detailed eight
important things to consider when claiming this tax credit. We’ve
covered them below.
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You have to be working or looking for work. In order to qualify, you must be paying for child care so you can work
or be looking for work. If you’re filing jointly with your spouse, they
must also be working, be a full time student, or mentally or physically
incapable of caring for themselves.
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You must be making money. This can be either earning wages or working as a self-employed
person. If you file jointly, your spouse must be making money also,
provided they’re not a full time student or mentally or physically
incapable of caring for themselves.
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The person or persons you’re paying for must qualify. A dependent that you can claim on your taxes under the age of 13
passes the eligibility test. Another dependent or even a spouse that’s
lived with you for more than half the year and is mentally or physically
incapable of caring for themselves would also qualify.
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Qualified care can take place in the home, outside the home, or at a day camp. Paying a babysitter at home, sending you kids to daycare, or off to a
day camp may all be qualified expenses. If you pay for child care in
your home, check Publication 926, Household Employer’s Tax Guide to see
if you may be considered a household employer.
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The credit is a percentage of qualified expenses. Although you can’t claim all expenses paid for child or dependent
care, you can claim up to 35% of your total expenses, depending on your
income.
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$3000 for one or $6000 for two or more. You can use up to $3000 a year in unreimbursed expenses for one qualifying person or $6000 for two or more per year.
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Overnight camps or tutoring programs don’t count. Neither does care provided by a spouse or someone else you claim as a
dependent. If your employer gives you dependent care benefits
additional regulations will come into play.
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Keep your receipts. If you claim this credit on your taxes, make sure you have all the
receipts to back it up. The name, address, Social Security number, or
EIN of your care provider must also be reported on your tax return.
If you’d like to read more about this tax credit, all the details can be found
in Publication 503, Child and Dependent Care Expenses (or you can request that it be mailed to you by calling the IRS
at 1-800-TAX-FORM).
