Do you have minor children in your household? If you do, you are probably one of the many parents who place their children in childcare or summer camp in order to work or look for work. If so, your costs might qualify for a federal tax credit. Here are some tips to keep in mind regarding the Child and Dependent Care Tax Credit:
1. Your expenses must be for the care of one or more qualifying persons. If you have a dependent child or children under age 13, this deduction may be taken.
2. All expenses claimed must be work-related, meaning you must pay for the care so that you can work or look for work. This rule also applies to your spouse if you file a joint return. Your spouse can qualify for this credit during any month they are a full-time student or if they are physically or mentally incapable of self-care.
3. You have to have earned income from wages, salaries, tips, or earnings from self-employment . If filing a joint return, your spouse must have earned income as well. Your spouse is considered as having earned income for any month that they are a full-time student or are incapable of self-care.
4. Usually, married couples must file a joint return. You can still take the credit, if you are legally separated or live apart from your spouse.
5. You might qualify for this credit whether you pay for care at home, at a daycare facility, or at a day camp.
6. The credit is worth between 20% and 35% of your allowable expenses and depends on the amount of your income.
7. The total expenses you can deduct are limited depending on the number of qualifying persons. The limit is $3,000 for one qualifying person or $6,000 for two or more people.
8. You can not include the cost of certain types of care for the tax credit, e.g. 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, and care given by a person you can claim as your dependent.
9. Keep every receipt and record for when you file your tax return next year. You will need the name, address, and taxpayer identification number of your care provider. You must report this information when you claim the credit on Form 2441, Child and Dependent Care Expenses.
10. Special rules will apply if you get dependent care benefits from your employer.
This credit is not just a summer tax benefit. You may be able to claim it for qualifying care that you pay out of pocket at any time during the year. For more information please refer to Publication 503.
