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Don’t Overlook the Child and Dependent Care Tax Credit this Summer 

6/15/2015

 
Day camps are common during the summer months.  Many parents pay for them for their children while they work or look for work.  If this applies to you, your costs may qualify for a federal tax credit that con lower your taxes.  Here are the top ten tips to know about the Child and Dependent Care Credit:

     1.  Care for Qualifying Persons. Your expenses must be for the care of one or more qualifying person.  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 your 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.  Se Publication 503 for more on this topic.

Remember that this credit is not just a summer tax benefit.  You may be able to claim it for qualifying care that you pay for at any time during the year.

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        • Other Topics
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        • Year-end Reporting Obligations >
          • 1099's
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          • Depreciation
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        • Employment Tax Credits
        • Independent Contractors
        • Tax Credits and Deductions for Businesses
        • Other Business Topics
        • Required Business Posters
      • Amended Returns
      • IRS Notices and Problems
      • Tax Plan >
        • All About the Earned Income Tax Credit
        • 5 IRS Audit Red Flags
        • Retirement Plans for Sole Proprietors
        • Are You Claiming All of Your Tax-Deductable Business Expenses for 2015?
        • All About Past Due Tax Returns
        • Do You Need to File Form 1099s?
        • How to File an Appeal with the IRS
        • Why You Might Get a Letter from the IRS, and What to Do
        • How to File an Amended Tax Return
        • Should You Claim the Home Office Deduction?
        • How to Avoid -- And Deal with -- Identify Theft
        • Q & A: IRS Audits
        • Are You Using the Right Business Structure?
        • Starting Planning for 2015 Income Taxes Now: 5 Tips
        • What You Need to Know About Estimated Taxes
        • Contractor or Employee? How the Income Tax Obligations Differ
        • The New Form 1095-A: Reporting Health Insurance Coverage
        • Are Your Social Security Payments Taxable?
        • Do You Qualify for the Earned Income Tax Credit?
        • Are You Eligible for Health Insurance Tax Credits
        • Employee Retirement Plans - Tax Advantages and Other Benefits
        • 5 Business Tax Credits You May Be Missing
        • New Business in 2012
        • Is it a Bad Debt or a Simple Revenue Loss? Telling the Difference
        • Business Taxes Add Complexity: How Will This Affect You?
      • Tax Scams