ElectroFile Income Tax Service Income Tax Service   Terry Hough, President Terry Hough

May 23, 2013 Newsletter

Keep the Child Care Credit in Mind for Summer

If you are a working parent or look for work this summer, you may need to pay for the care of your child or children. These expenses may qualify for a tax credit that can reduce your federal income taxes.

The Child and Dependent Care Tax Credit is available not only while school is out for summer, but also throughout the year. Here are seven key points to know about this credit.

  1. You must pay for care so you – and your spouse if filing jointly – can work or actively look for work. Your spouse meets this test during any month they are full-time student, or physically or mentally incapable of self-care.
  2. You must have earned income. Earned income includes earnings such as wages and self-employment. If you are married filing jointly, your spouse must also have earned income. There is an exception to this rule for a spouse who is full-time student or who is physically or mentally incapable of self-care.
  3. You must pay for the care of one or more qualifying persons:
    • Qualifying children under age 13 who you claim as a dependent .
    • Your spouse or dependent who lived with you for more than half the year if they are physically or mentally incapable of self-care.
  4. You may qualify for the credit whether you pay for care at home, at a daycare facility outside the home or at a day camp. If you pay for care in your home, you may be a household employer.
    • Expenses for overnight camps or summer school tutoring do not qualify.
    • The cost of care provided by your spouse or a person you can claim as your dependent does not qualify.
    • If you get dependent care benefits from your employer, special rules apply.
  5. The credit is a percentage of the qualified expenses you pay for the care of a qualifying person. It can be up to 35 percent or as low as 20 percent of the qualified expenses, depending on your income.
  6. You may use up to $3,000 of the unreimbursed expenses you pay in a year for one qualifying person or $6,000 for two or more qualifying person.
  7. Keep your receipts and records to use when you file your 2013 tax return next year. Make sure to have the name, address and Social Security number or Employer Identification number of the care provider. You must report this information when you claim the credit on your return.