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What to Know About Summer Child Care Expenses

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May 31st 2018
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If you’re married and working with young children, during the school year your kids are occupied most of the workday, but who looks after them in the summer? You should know there’s a silver tax lining for this extra cost.

Generally, you should be able to qualify for a dependent care credit, often called the “child care credit.” In fact, the credit may be more widely available than you think.

Who is eligible?

To qualify for the credit in the first place, you must incur expenses of caring for a child under age 13 so you can be gainfully employed. A married couple is treated as being “gainfully employed” if one spouse works full time and the other works either full-time or part-time or is a full time student. A married couple must file a joint return to claim the credit.

How much is the dependent care credit?

The applicable credit is 35 percent of the qualified expenses for taxpayers with an adjusted gross income (AGI) of $15,000 or less. The percentage is reduced by 1 percent for each $2,000 that your AGI increases until it bottoms out at 20 percent. Thus, the credit is 20 perent for taxpayers with an AGI above $43,000.

The credit is available for the first $3,000 of qualified expenses for one child and $6,000 for two or more children. This results in a maximum credit of $600 for one child and $1,200 for two or more children if you have more than $43,000 in AGI.

What expenses qualify?

The list of qualified expenses includes the costs of traditional babysitters, day care centers and nursery schools.  But think outside the box for child care expenses during the summer months.

For instance, costs incurred at a municipal pool or country club may qualify for the credit. So can the cost of sending a child to a day camp where he or she enjoys recreational activities like swimming, boating or hiking. But the cost of an overnight camp does NOT qualify. This includes camps run by the Boy Scouts, Girl Scouts or other organizations.

The day camp can even be a “specialty camp” emphasizing a particular skill or other aspect. For instance, you might enroll a computer whiz in a camp focusing on technology or send the next Pele to a soccer camp. The full cost of attending the specialty camp is eligible for the credit, but you can’t add on expenses for special equipment, uniforms or supplies.

Is that all there is?

Not quite. Remember to obtain the information needed for claiming the credit on your personal tax return, including the day camp’s name, address and taxpayer identification number. Then make sure that Form 2441 (Child and Dependent Care Expenses) is attached to the return.

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