Summer is here and the kids are out of school. Most parents, however, still continue to work throughout the summer months and must look for alternative care for their children. Summer camp and daycare are two means of providing care for children, and also two of the main drivers of spending on children under the age of 13 in the United States.
What is Child and Dependent Care Credit?
The Child and Dependent Care Credit is a specific tax credit program for taxpayers who use childcare for those under the age of 13. The credit is meant specifically for working parents, and since it is a government program, there are rules for eligibility and qualification.
To qualify, you must meet all of the following:
- You (and your spouse, if you are married filing jointly) must have earned income for the tax year.
- You must be the custodial parent or main caretaker of the child or dependent.
- The child or dependent care service must have been used so that you could work or look for employment.
- Your filing status must be single, head of household, qualifying widow or widower with a qualifying child, or married filing jointly.
- Your child or dependent must be under 13 or must be disabled and physically or mentally incapable of caring for themselves.
- The childcare provider cannot be your spouse or dependent or the child’s parent.
How Can I Claim the Tax Credit for Daycare?
Daycare expenses are the main reason for the Child and Dependent Care Credit. Since the implementation of the tax credit, many childcare facilities offer tax documents to help you file for the credit. In any case, you must have the proper documentation supporting the amount you paid the previous year to claim this credit.
You must meet the following eligibility and qualification requirements:
- You are limited on how much of your childcare expenses you can claim. If your income is at least $15,000 annually, you can deduct 35% of your childcare expenses from your taxes. If your income is $43,000 or above, you can only deduct 20% of the expenses.
- You can only use your tax credit for two children. If you have more than two children in care, you cannot claim the expenses for all of them.
- The caregiver you pay can be a family member, but they must be at least 19 years of age, cannot be your legal dependent nor your spouse, and cannot be the child’s parent.
- Once a child turns 13, you can no longer claim the credit for that child.
Is My Child’s Summer Camp Tax Deductible?
All typical childcare from daycare to babysitting is considered eligible for the Child and Dependent Care Tax Credit as long as the provider qualifies and you and your children meet the same eligibility requirements as for daycare.
However, the only type of summer camp that qualifies is day camp. If you send the kids away to an overnight camp, you won’t garner a tax deduction since residence camps and programs don’t qualify and aren’t considered a work-related expense.
Contact Paramount Tax Relief in Sacramento for More Information
The Child and Dependent Care Tax Credit is a valuable reduction on your taxes as long as you use a qualified program and maintain eligibility. To discuss your eligibility, please don’t hesitate to contact the team of professionals at our Sacramento tax relief company serving Los Angeles.
If you’re not sure why you should choose us for your tax help, just read the testimonials from our satisfied clients!