Wang Solutions

The Endless Summer of Child Care:

It’s summer! No more waking up early, eating packed lunches, and doing more work once you get home…. Only if you’re a kid on summer vacation, that is…

If you’re an adult, chances are you still have to work, despite the fine weather beckoning you to the beach. And you also have to figure out how to keep the kids occupied for the next few months. Leaving them at home with a video game console, the microwave, and free time on their hands is probably not a good idea. However, you might consider placing them in daycare, having them go to summer camp each day, or getting a sitter at your house. 

Those are very smart ideas not only because they give you peace of mind about the care of your child, but also because the costs of care may qualify for the Child and Dependent Care Credit, which can lower your taxes. The credit is up to 35% of the expenses you pay for care, depending on your income. You can receive maximum $3,000 credit yearly for the care of one qualifying person and $6,000 for two or more people. Although this credit isn’t just a summer tax benefit, this summer season is probably when you’ll be spending the most on child and dependent care.

The bad news is that you can’t get the credit for sending your child off to make smores and tell late night ghost stories at summer camp: overnight camp costs don’t qualify, along with summer school tutoring. Also, if you’re paying one of the older kids around the house (under age 19) to watch the young ‘uns, or having your spouse or other dependent take care of them, those costs won’t qualify either. And if you hired a sitter because you’re off to Vegas for some hot fun, you’re out of luck: to qualify for the Child and Dependent Care Credit, the expenses must be work-related – meaning that you paid for care in order to work or look for work. Of course, to get a tax credit, you must have earned income for that year, such as from wages, salaries and tips.

The good news is that expenses for the care of your dependent child/children under age 13 aren’t the only ones that qualify for this federal tax credit. Any married folks out there with a spouse who is going to school full-time needn’t be bitter that they have to sweat to bring home the bacon while their loved one gets to hit the books: expenses for your spouse’s care will qualify any month they are a full-time student. Expenses paid for care if your spouse is physically or mentally incapable of self-care will also qualify. You should remember that your spouse is treated as having earned income for any month that they are a full-time student or incapable of self-care.

Why do you need to remember that? Because if you’re married, you must file a joint return to get the credit and when you file a joint return, your spouse must also have earned income. No worries if you’re legally on bad terms with your once-significant other; spouses who are legally separated or living apart don’t have to file jointly.

As with anything, keep all your receipts and records. To claim the credit on your tax return, you’ll have to provide the name, address and Social Security number or employer identification number of the care provider. If this information is not available to you, you should consider seeking a more reputable source of care – both for safety reasons and so you can enjoy the Child and Dependent Care Credit.