Dependent Care (August 2017)

Tax Tips

Summer Dependent Care Credit

By Michael Aston, E.A.
Alhambra Tax Center

 

You might be eligible to claim a tax credit for sending your kids to daytime summer camp. But it must be a day camp. Overnight camps do not qualify.

The IRS urges that you save that paperwork and make sure the organization’s federal identification number is somewhere shown on your receipts.

Below are a few key facts to know about the credit:

1.     Qualifying Person. This can be for a child under age 13 or a spouse/dependent who lived with you for more than half the year and is physically or mentally incapable of self-care.

2.     Work-Related Expenses.  The care must have been necessary for the taxpayer and if married the spouse could work or look for work. This rule does not apply if the spouse was disabled or a full-time student.

3.     Earned Income. The taxpayer and their spouse if married filing jointly must have earned income for the tax year. Special rules apply to a spouse who is a student or disabled.

4.     Credit Percentage/Expense Limits. The credit is worth between 20% to 35% of allowable expenses. The percentage depends on the income amount. The allowable expenses are limited to $3,000 for one qualifying child and $6,000 for two or more qualifying children.

5.     Care Provider Information.  The name, address and taxpayer identification number of the care provider must be included on the return. The childcare provider cannot be the taxpayer’s spouse, dependent or the child’s parent.

6.     Dependent Care Benefits.  Special rules apply for people who get dependent care benefits from their employer. For these rules see the instructions for Form 2441.

7.     Special Circumstances.  Since every family is different, the IRS has a series of exceptions to the rules in the qualification process. These exceptions allow greater number of families to take advantage of this credit, for more information see IRS Publication 503.

The IRS dose have an interactive tax assistant tool at IRS.gov. Go to search tab and type in “Am I Eligible to Claim the Child and Dependent Care Credit.” Answer the questions and it will let you know if you are eligible.

If you have any questions please contact the IRS or any tax professional.

 

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