Child Care Tax Credit

Finding someone to care for your child while you work or during school holiday can tie up a large portion of your budget. Sending your kids off to school can account for a much of your childcare needs, but if your children are younger than school age, or if they are on summer vacation, you’re likely to pay more money for childcare. The government wants to help parents offset the cost of childcare expenses incurred for children under thirteen by offering a tax credit. The child for whom the care is rendered must be the taxpayer’s dependent, and separate rules apply to parents who are divorced or separated.

There are different type of child care that qualify for the tax credit. It’s important to be aware of the qualifying care so you can maximize your benefits and cut back your expenses at tax time.

  • Camp: If you send your child to a day camp, even specialized camps (those that focus specifically on a single sport or craft), you may be entitled to the tax credit. It’s imperative that the day camp follows all state laws in correlation with other care centers. Camps where the child stays overnight don’t qualify.
  • Expenses for School Costs: Expenses for care before or after school for children in kindergarten or higher qualify for the Child Care Tax Credit. Even those children who aren’t yet at the kindergarten level may qualify if they have school related expenses.
  • Day Care Center: Facilities who serve six or more children qualify for the credit if they abide by all laws, both local and state. Parents whose children attend a qualifying day care center are eligible to claim the credit
  • Care at Home: This is an important distinction. If you pay someone to watch your child in your own home, you do not qualify for the credit. This is because the caretaker would be your employee, and you should be following payroll rules and taxation.

The Child Care Tax Credit ranges between twenty and thirty five percent of your expenses, in relation to you annual income. The higher your income, the less of a credit you are entitled to. For one child, the credit may be worth anywhere from $600 to $1,050, because you can claim up to $3,000 of expenses for the year. For more than one child, the expense limit is increased to $6,000, however that is the maximum amount regardless of how many children are given care.

You will be required to submit information about the child care facility, such as the provider’s name, address, tax ID number for those organizations who are not exempt. You should ask for all of this information upon payment of the service, so you are able to claim the credit.

Some states offer a tax credit in addition to the federal credit. If you reside in a state that has this option, you may need to provide additional information like a phone number, in order to claim the expense. You can also qualify for the credit if you file a joint return with your spouse, provided your spouse is a full time student. Additionally, those who are the primary caretaker for their disabled spouse may qualify for the credit.