Don’t Overlook the Child and Dependent Care Tax Credit
For many, school is out for the season and summer camps have begun!
Many parents rely on summer camps as their main form of childcare until school starts back up. Note that your camp costs may qualify for a tax credit that could potentially lower your taxes for 2015.
Following are the top ten tips regarding the Child and Dependent Care Credit from the Internal Revenue Service:
1. Care for Qualifying Persons.
Your expenses must be for the care of one or more qualifying persons. Your dependent child or children under age 13 usually qualify. For more about this rule see Publication 503, Child and Dependent Care Expenses.
2. Work-related Expenses.
Your expenses for care must be work-related. This means that you must pay for the care so you can work or look for work. This rule also applies to your spouse if you file a joint return. Your spouse meets this rule during any month they are a full-time student. They also meet it if they’re physically or mentally incapable of self-care.
3. Earned Income Required.
You must have earned income, such as from wages, salaries and tips. It also includes net earnings from self-employment. Your spouse must also have earned income if you file jointly. Your spouse is treated as having earned income for any month that they are a full-time student or incapable of self-care. This rule also applies to you if you file a joint return. Refer to Publication 503 for more details.
4. Joint Return if Married.
Generally, married couples must file a joint return. You can still take the credit, however, if you are legally separated or living apart from your spouse.
5. Type of Care.
You may qualify for it whether you pay for care at home, at a daycare facility or at a day camp.
6. Credit Amount.
The credit is worth between 20 and 35 percent of your allowable expenses. The percentage depends on the amount of your income.
7. Expense Limits.
The total expense that you can use in a year is limited. The limit is $3,000 for one qualifying person or $6,000 for two or more.
8. Certain Care Does Not Qualify.
You may not include the cost of certain types of care for the tax credit, including:
- Overnight camps or summer school tutoring costs.
- Care provided by your spouse or your child who is under age 19 at the end of the year.
- Care given by a person you can claim as your dependent.
9. Keep Records and Receipts.
Keep all your receipts and records for when you file your tax return next year. You will need the name, address and taxpayer identification number of the care provider. You must report this information when you claim the credit on Form 2441, Child and Dependent Care Expenses.
10. Dependent Care Benefits.
Special rules apply if you get dependent care benefits from your employer. See Publication 503 for more on this topic.
Information from www.irs.gov.
Davis and Hodgdon Associates CPAs has been assisting nonprofits, individuals and businesses with tax, accounting, and financial planning services in the Burlington Vermont Metro area for more than 20 years. If you have any questions or concerns please feel free to call 802.878.1963 or email [email protected].