Quantcast
Channel: Accountant's Announcements » child and dependent care tax credit
Viewing all articles
Browse latest Browse all 2

School is (Almost) Out for Summer!

0
0

summer-day-campsSummer is right around the corner and with the rising temperatures, the final school bell for the year is about to ring. Parents of school age kids all over the country will now be left with entertaining their children for the summer or finding responsible parties to tend to their children while they work. Some parents send their kids to sleep away camps for the summer. While often enjoyable, the camps can hit the pocketbook hard and offer no tax incentive for the parents. Are there other options for keeping the kids out of trouble, while saving some tax dollars in the end?

Of course! The answer – day camps! Day camps are considered to be qualified dependent care expenses for those dependents under the age of 13, which means the taxpayer (parent) will be eligible to receive the dependent care tax credit. Day camps are considered qualified expenses; however, the cost of any sleep-away camp are not and do not qualify for the credit. Almost any day camp, even specialty camps, like soccer camp or dance camp, will qualify for this dependent care treatment. Now for the nit-gritty details:

  • These qualified expenses can be taken into account up to $3,000 for the first child or up to $6,000 if you have more than 2 dependents. Keep in mind- these dollar figures are reduced if Mom, Dad, or qualifying taxpayer have dependent care expenses taken out of their paycheck on a pre-tax basis
  • If the dependent has their 13th birthday during the tax year, the only qualified expenses that will be allowed towards the credit are those that incurred prior to their birthday.
  • Both spouses need to at least work part time, be a full time student or be incapable of self-care in order to be able to claim the credit.
  • The credit is based on the smallest of either the amount of expense (up to either $3,000 or $6,000 limit) or taxpayer earned income, or spouses earned income.
  • The credit is then 20-35% of the smaller amount based on the adjusted gross income (AGI) reported on the tax return. Many factors apply with this, so be sure to consult with a tax professional for assistance calculating the credit for your personal situation.

If your child isn’t interested in attending day camps, the same rules apply for day care over the summer. However, isn’t it nice to know that there are tax benefits for you while your kids have a fun and entertaining summer!

By: Jill Blakeman, CPA


Viewing all articles
Browse latest Browse all 2

Latest Images

Trending Articles





Latest Images