HomeChild CareTax Tip: Five Tax Facts about Summertime Child Care Expenses
Posted in Child Care on 6th January 2012

Tax Tip: Five Tax Facts about Summertime Child Care Expenses

Article by George Bauernfeind

Summertime Tax Tip 2009-03

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 the IRS wants you to know about a tax credit 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.

For more information, including rules for claiming this credit for your spouse or a dependent age 13 or over who is not able to care for himself or herself, check out IRS Publication 503, Child and Dependent Care Expenses. This publication is available on the IRS Web site, IRS.gov.

Alternative Minimum Tax planning:

Many tax credits that are allowable for the regular tax are not allowable for the Alternative Minimum Tax. Currently the child care credit may be claimed against a taxpayer’s AMT liability, but it is a fairly complicated formula if the taxpayer has other tax credits, and it is a formula that is changed periodically by Congress. Specifically, for tax years through 2008, the nonrefundable portion of the child tax credit that may be claimed by the taxpayer could not exceed his or her regular income tax liability (reduced by the foreign tax credit), plus alternative minimum tax (AMT) liability. Effective in 2009, the nonrefundable portion of the child tax credit that may be claimed cannot exceed the excess of the regular income tax liability plus AMT liability, over the sum of the nonrefundable personal credits allowed (other then the child tax credit, adoption credit, the retirement savings credit, the residential energy efficient property credit, the plug-in electric drive motor vehicle credit, and the foreign tax credit). No carryover of the credit is allowed if the credit exceeds these limits.

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