Many parents who work or are looking for work must arrange for care of their children under 13 years of age during the school vacation. Here are five facts to know about tax credits available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the lazy hazy days of summer and throughout the rest of the year.
1. The cost of day camp can count as an expense towards the child and dependent care credit.
2. Expenses for overnight camps do not qualify.
3. If your childcare provider is a sitter at your home or a daycare facility outside the home, you’ll get some tax benefit if you qualify for the credit.
4. The actual credit can be up to 35 percent of your qualifying expenses, depending upon your income.
5. You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.
Other items you need to consider.
1. In order to qualify for the deduction you must have earned income. If you are married both you and your spouse must have earned income. There is an exception to the earned income requirement when one spouse is disabled.
2. Even if your childcare provider is a sitter at your home you will need to have their social security number or EIN.
3. If you pay someone to come to your house to care for your dependent you may be a household employer. If the person who comes to your home is self-employed you are not considered a household employer. A household employer must have an EIN and may have to pay employment taxes.
Please contact us if you have any questions about the child care credit or household employment taxes.