For millions of working parents the summer comes with the added challenge of finding care for their summer vacation bound kids. School hours need to be replaced with child-care hours.With summer underway, you probably now have the child-care summer gap covered. There is a good chance this care could be tax deductible using the Child & Dependent Care Credit.
Qualifications for the creditTo take advantage of this tax savings opportunity you must meet the following qualifications.
You have: one or more dependent children under the age of 13
You have: earned income (wages, salary, tips or business income)
You are: single or married filing a joint tax return
You have: qualified day care expenses
You are: financially supporting and maintaining a home for your dependent child
What you should knowMost taxpayers that use this tax credit each year have their tax moves down. Those who use day care to bridge the summer gap could have a $3,000 to $6,000 tax credit if you organize now. To receive the credit:
The care must be provided so you can work. The care can also qualify if you are looking for work.
The care does not have to be at a facility. This means day camps, day care, and nanny care qualify. However, overnight camps or summer school costs do not qualify.
If married, both spouses need to work. There is some leeway if one spouse is a full-time student or is disabled.
You need to keep records. You need to have receipts for the care expense and you will have to report the caregiver’s tax information (name, address, and tax id/Social Security number) to receive the credit.
The care payment needs to qualify. You may not pay a dependent or your spouse to care for your children. But beyond this, who you pay is flexible.
The Child & Dependent Care Credit can allow you to deduct 20 – 35% of your summer child-care expense if you plan accordingly. Other details may apply so please call if you wish to discuss how this tax opportunity may work for you.
