School is out and kids are excited about summertime. But working parents usually aren’t quite as excited, since summer means extra child care expenses.
If this is the case with you, the Child and Dependent Care Tax Credit can help you out. This federal tax credit allows you to reduce your tax burden during the summer months and throughout the year by claiming child care expenses on your tax return.
Here are the requirements to claim the credit.
-
You have to be working or looking for work. In order to qualify, you must be paying for child care so you can work or be looking for work. If you’re filing jointly with your spouse, they must also be working, be a full time student, or mentally or physically incapable of caring for themselves.
-
You must be making money. This can be either earning wages or working as a self-employed person. If you file jointly, your spouse must be making money also, provided they’re not a full time student or mentally or physically incapable of caring for themselves.
-
The person or persons you’re paying for must qualify. A dependent that you can claim on your taxes under the age of 13 passes the eligibility test. Another dependent or even a spouse that’s lived with you for more than half the year and is mentally or physically incapable of caring for themselves would also qualify.
-
Qualified care can take place in the home, outside the home, or at a day camp. Paying a babysitter at home, sending you kids to daycare, or off to a day camp may all be qualified expenses. If you pay for child care in your home, check Publication 926, Household Employer’s Tax Guide to see if you may be considered a household employer.
-
The credit is a percentage of qualified expenses. Although you can’t claim all expenses paid for child or dependent care, you can claim up to 35% of your total expenses, depending on your income.
-
$3000 for one or $6000 for two or more. You can use up to $3000 a year in unreimbursed expenses for one qualifying person or $6000 for two or more per year.
-
Overnight camps or tutoring programs don’t count. Neither does care provided by a spouse or someone else you claim as a dependent. If your employer gives you dependent care benefits additional regulations will come into play.
-
Keep your receipts. If you claim this credit on your taxes, make sure you have all the receipts to back it up. The name, address, Social Security number, or EIN of your care provider must also be reported on your tax return.
If you’d like to read more about this tax credit, all the details can be found in Publication 503, Child and Dependent Care Expenses (or you can request that it be mailed to you by calling the IRS at 1-800-TAX-FORM).