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Summertime Child Care Expenses Might Result in Tax Savings

  Sanjiv Gupta CPA  Published 
Summertime Child Care Expenses Might Result in Tax Savings

Children lesser than 13 years of age require adult support and care, during their summer vacations. Parents who are working or looking for employment opportunities must enroll their kids at child care centers. These expenses qualify for a tax credit. These tax credits help to minimize the impact created by paying income taxes.

Either of the parents must be fully aware of these child care center rules to avail of these tax credits provided by the IRS. The first and foremost condition that needs to be satisfied is that the parent must declare that the child for whom the expenses are incurred in his/ her dependant. The only case where this rule gets an exception is where the parents are divorced or living separately.

The child care expenses incurred during the summer vacations and the entire year can be claimed for deductions and qualified for tax credits. However there are certain rules to get this tax credit, and these are explained below:

Daycare facility – These are centers where parents pay a certain amount and leave the kids to be cared for until the time they return from work. Parents who are interested to get the tax credit should choose daycare facilities that care for a minimum of 6 kids and those that follow all the regulations of that respective state. Expenses paid to such facilities will qualify for the tax credit.

Day camps – A day camp is where the kids are encouraged to engage in diverse fields for an entire day for a fee. The fee paid to the day camps is considered to be child care costs for the dependent child. Hence they qualify for tax credits. However, for the day camp to be recognized as an eligible institution, it should provide camps at least for 6 kids and should follow all the state government norms.

Overnight camp or tutoring – Expenses paid for overnight camps or tutoring expenses will not qualify for any tax credit.

School expenses – Education expenses will get a tax credit provided it is paid for children below the kindergarten levels. Expenses over and above the kindergarten levels will not qualify under the IRS rules. The child care expenses would still continue to qualify whether it is after the school hours or before the school hours.

In-Home care – If the kid’s caretaker is employed at the parent’s home, then the parent should file payroll taxes as the care-taker is considered to be the employee of the parent.

Minimum Qualifying expenses – To get the tax credit, the parent can use up to $3000 of the unreimbursed amount of 2012 for one individual or $6000 for two or more qualifying kids.

Records required – The parent must furnish complete details of the kid’s social security number, the care provider’s name, address, and the tax identification number. The tax credit will not be allowed for parents who furnish incomplete information as it is very difficult to credit savings without correct information.