If you have young children, day care expenses may be a costly fact of life for you, as well as for any working parents on your payroll.
You’re probably aware that you can take a tax credit for child care expenses. But did you know that qualifying summer day camp expenses may also apply? That’s where the Child and Dependent Care Credit comes into play. What is the Child and Dependent Care Credit? It’s a federal tax credit that can reduce your tax bill for certain qualified child and dependent care expenses.
Keep these IRS tips in mind when determining whether your day camp or other child care expenses qualify for the Child and Dependent Care Expenses Credit:
- The child must be under age 13 when the care was provided.
- You cannot take the credit for overnight camp expenses.
- You may qualify for the credit whether you use a home sitter or a day care facility.
- Depending on your income, the credit can be up to 35% of your qualifying expenses.
- You can use up to $3,000 of un-reimbursed expenses annually for one qualifying individual or $6,000 for two or more qualifying individuals.
You will need to identify the child care provider to the IRS by providing the name, address, and Taxpayer Identification Number. If the provider is a tax-exempt organization such as a church or a school, you don’t have to show the TIN — just write in tax-exempt. Use Form W-10, Dependent Care Provider’s Identification and Certification, to request this info from the child care provider.
If you pay someone to watch your child in your home, you may be required to withhold payroll taxes. For more information on this rule, check out IRS Publication 503, Child and Dependent Care Expenses.