Can my Summer Day Care Expenses Earn a Tax Credit?

Maribeth Wright | July 26th, 2010

Arranging summer day care for your children can be challenging, but knowing those expenses may be tax deductible may help. The IRS recently shared some tips regarding the tax credit available for child care of children under age 13.

Child and Dependent Care Credit Tips:

  1. The cost of day camp may count as an expense toward the child and the 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 on 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.

You’ll need to provide the name and taxpayer identification number (usually the Social Security number) of the child or children receiving dependent care when filing your taxes. You’ll also need to provide the name, address and tax identification number of the childcare provider. (If the provider is a tax-exempt organization, however, the tax ID number is not necessary.)

Please note that if you receive dependent care benefits through your employer, for example an amount paid directly to you for childcare, daycare services provided by or sponsored by your employer or you make pre-tax contributions to a dependent care flexible spending account, your dollar limit for purposes of the tax credit may be reduced.

You’ll want to document that your childcare expenses are related to your work when filing your taxes, so make sure recordkeeping becomes part of your routine.  For additional information about the Child and Dependent Care Credit, please ask your financial advisor.

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