Some families are glad that school is back in session and the kids are gone... and some will truly miss the fun-filled afternoons with the little buggers. Whichever camp you may fall in, here are some tax tips you need to know about child care expenses:
- Save those receipts from summer day camp - these costs can count as an expense towards the child and dependent care credit.
- TIP: overnight camps do not qualify.
- A babysitter at your home qualifies for the same tax benefit as using an official daycare facility.
- TIP: Make sure you get the social security number for your sitter or EIN number for the day care facility. It's important to note that if you take the childcare tax deduction for your babysitter, they need to claim your payments as income.
- You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying child or $6,000 for two or more qualifying individuals to figure the credit.
- TIP: If your employer partially reimburses you for child care, you can still deduct the difference between your actual expenses and the reimbursement (up to the limit mentioned above)
The biggest tip to remember with child and dependent care expenses is they must be incurred to enable a taxpayer to work. Officially, it's called the "Work-Related Expense Test" and can be found, along with the other criteria for the credit, in Publication 503.
"Child and dependent care expenses must be work-related to qualify for the credit. Expenses are considered work-related only if both of the following are true: (1) they allow you (and your spouse if you are married) to work or look for work and (2) they are for a qualifying person's care."