School is out for summer, and for many families that means one or more children will be enrolled in childcare or a summer day camp during the workday. If you have a child in daycare during the summer months you may qualify for a federal Child and Dependent Care Credit. Although this credit is not limited to the summer months, many families find themselves paying for childcare only during non-school periods, and may not be aware of their eligibility to claim the credit.
This credit applies for childcare at home, at a daycare facility, or at a day camp, and can be as much as 35% of childcare expenses (depending on your income). You can’t get a credit for “babysitting” by a spouse or an older child.
Certain rules and restrictions apply. In most cases the child or children must be under the age of 13, and the childcare expenses must be work related. In other words, you must be paying childcare fees so that you can work or, if you are currently unemployed, you can look for work.
You must have earned income from wages, salaries, tips, or self-employment. If you file taxes jointly with your spouse, he or she must also have earned income. A spouse who is a full-time student may also qualify. Married couples are required to file a joint return to get the Child and Dependent Care Credit, but the rule does not apply if a couple is legally separated and living apart.
The total expense you can use for the Child and Dependent Care Credit in a single tax year is $3,000 for one child, and $6,000 for two or more children. Be sure to keep all of your receipts and payment records, including the name, address, Social Security number, or employer identification number of the childcare provider or day camp. This information must be reported when you file your tax return.
For answers to your questions about the Child and Dependent Care Credit, or any other tax-related questions, please contact the Gray, Gray & Gray Tax Department at (781) 407-0300.