child care tax credit

10 Facts About the Child and Dependent Care Credit

The Child and Dependent Care Credit can help offset some of the costs you pay for the care of your child, a dependent or a spouse.

 

Here are 10 facts the IRS wants you to know about the child and dependent care credit expenses.

1. If you paid someone to care for your child, dependent or spouse last year, you may qualify for the child and dependent care credit. You claim the credit when you file your federal income tax return.

2. You can claim the Child and Dependent Care Credit for “qualifying individuals.” A qualifying individual includes your child under age 13. It also includes your spouse or dependent who lived with you for more than half the year who was physically or mentally incapable of self-care.

3. The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.

4. You, and your spouse if you file jointly, must have earned income, such as income from a job. A special rule applies for a spouse who is a student or not able to care for himself or herself.

5. Payments for care cannot go to your spouse, the parent of your qualifying person or to someone you can claim as a dependent on your return. Payments can also not go to your child who is under age 19, even if the child is not your dependent.

6. This credit can be worth up to 35 percent of your qualifying costs for care, depending upon your income. When figuring the amount of your credit, you can claim up to $3,000 of your total costs if you have one qualifying individual. If you have two or more qualifying individuals you can claim up to $6,000 of your costs.

7. If your employer provided dependent care benefits, special rules apply. See Form 2441, Child and Dependent Care Expenses for how the rules apply to you.

8. You must include the Social Security number on your tax return for each qualifying individual.

9. You must also include on your tax return the name, address and Social Security number (individuals) or Employer Identification Number (businesses) of your care provider.

10. To claim the credit, attach Form 2441 to your tax return. If you use IRS e-file to prepare and file your return, the software will do this for you.

For more information see Publication 503, Child and Dependent Care Expenses, or the instructions for Form 2441. Both are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

kids

10 Tax Benefits for Parents with Kids

Your children may help you qualify for some valuable tax benefits.

Here are 10 things parents should consider when filing their taxes this year.

1. Dependents In most cases, a child can be claimed as a dependent in the year they were born. For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.

2. Child Tax Credit You may be able to take this credit for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. For more information see IRS Publication 972, Child Tax Credit.

3. Child and Dependent Care Credit You may be able to claim this credit if you pay someone to care for your child or children under age 13 so that you can work or look for work. See IRS Publication 503, Child and Dependent Care Expenses.

 

10 Tax Benefits for Parents with Kids

4. Earned Income Tax Credit The EITC is a tax benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund. IRS Publication 596, Earned Income Credit, has more details.

5. Adoption Credit You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. If you claim the adoption credit, you must file a paper tax return with required adoption-related documents.  For details, see the instructions for IRS Form 8839, Qualified Adoption Expenses.

6. Children with earned income If your child has income earned from working, they may be required to file a tax return. For more information, see IRS Publication 501.

7. Children with investment income Under certain circumstances a child’s investment income may be taxed at their parent’s tax rate. For more information, see IRS Publication 929, Tax Rules for Children and Dependents.

8. Higher education credits Education tax credits can help offset the costs of higher education. The American Opportunity and the Lifetime Learning Credits are education credits that can reduce your federal income tax dollar-for-dollar. See IRS Publication 970, Tax Benefits for Education, for details.

9. Student loan interest You may be able to deduct interest paid on a qualified student loan, even if you do not itemize your deductions. For more information, see IRS Publication 970.

10. Self-employed health insurance deduction If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage for any child of yours who was under age 27 at the end of the year, even if the child was not your dependent.

Ten Tax Tips for Taxpayers with Children and Students

Do you have children? Having children or students enrolled in higher education will most likely change your tax situation. Below you will find 10 things you should consider before filing your taxes.

Dependents – In most cases, a child can be claimed as a dependent the first year they were born. There are however a few exceptions to this. Refer to the IRS publication 501 – Exemptions, Standard Deduction, and Filing Information.

Child Tax Credit – For each of your children under age 17, you may be able to take this credit. If you only qualify for a partial credit instead of the full Child Tax Credit, you may be eligible for the Additional Child Tax Credit. Even if you don’t owe any tax, you may still be eligible for the Additional Child Tax Credit which is a refundable credit and may give you a refund. See IRS Publication 972, Child Tax Credit

Child and Dependent Care Credit – If you work or are looking for work and you have to pay someone to care for your child under the age of 13, you may be able to claim this credit. See IRS Publication 503, Child and Dependent Care Expenses.

Earned Income Credit – The EITC or EIC is a great benefit for taxpayers who work and have earned income from wages, self-employment or farming. The EITC reduces the amount of tax you owe and may also give you a refund. See IRS Publication 596, EIC Table to see if you qualify and check your AGI in the EIC table.

Adoption Credit – If you adopted a child you may be eligible for a tax credit covering your qualifying expenses paid to adopt an eligible child. qualifying expenses paid to adopt an eligible child. See the instructions for IRS Form 8839, Qualified Adoption Expenses.

Children with Earned Income – If your child has income earned from working they may be required to file a tax return. For more information see IRS Publication 501.

Children with Investment Income – Under certain circumstances a child’s investment income may be taxed at the parent’s tax rate. For more information see IRS Publication 929, Tax Rules for Children and Dependents.

 

Student Tax Tips

Coverdell Education Savings Account – This savings account is used to pay qualified educational expenses at an eligible educational institution. Contributions are not deductible, however, qualified distributions generally are tax-free. For more information see IRS Publication 970, Tax Benefits for Education.

Higher Education Credits – Education tax credits can help offset the costs of education. The American Opportunity and the Lifetime Learning Credit are education credits that reduce your federal income tax dollar-for-dollar, unlike a deduction, which reduces your taxable income. For more information see IRS Publication 970.

Student Loan Interest – You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income so you do not need to itemize your deductions. For more information see IRS Publication 970.

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5 Tax Facts about Summertime Child Care Expenses

Many parents who work or are looking for work must arrange for care of their children under 13 years of age during the school vacation. There are often possible tax deductions that can be taken advantge of for parents who put their children into some form of supervised care. If you paid a daycare center, babysitter, summer camp, or other care provider to care for a qualifying child under age 13 or a disabled dependent of any age, you may qualify for a tax credit of up to up to 35 percent of qualifying expenses of $3,000 for one child or dependent, or up to $6,000 for two or more children or dependents.

 

5 Tax Facts about Summertime Child Care Expenses

Here are five facts the IRS wants you to know about a tax credit available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the lazy days of summer and throughout the rest of the year.

 

Summer Child Care Expenses that are Deductible

  1. The cost of day camp can count as an expense towards the child and dependent care credit.
  2. Expenses for overnight camps do not qualify.
  3. If your childcare provider is a sitter at your home or a daycare facility outside the home, you’ll get some tax benefit if you qualify for the credit.
  4. The actual credit can be up to 35 percent of your qualifying expenses, depending upon your income.
  5. You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

Regardless of whether you paid for after-class child care during the school year or a week of day camp during summer break, you can apply the costs to the child and dependent care tax credit and use it to cut your tax bill at filing time. The child and dependent care tax credit is available to help offset the costs of providing care for children under age 13 while the child’s parents are working. If you work from home and you pay someone to watch your child so that you can get your work done, those expenses may qualify for the credit. Day camp expenses may also qualify for the credit, even if the camp is a “specialty camp,” such as a sports camp or a computer camp.

 

Almost everything that you bought in order to send your kid to camp is non-deductible. That includes:

  • Sports equipment. It’s personal in nature and not deductible, even if it’s required.
  • Clothing. Again, it’s personal in nature even if specifically required. And yes, even if those are clothes that your child would never, ever wear outside of camp.
  • Fans and furniture for overnight camp. Still, personal in nature and not deductible.

Expenses involved in simply getting ready for camp are deductible. That includes:

  • Physicals. The cost of a physical or well exam is deductible; you do not have to be sick in order for the visit to be deductible.
  • Shots. Vaccines and immunizations are considered preventative care and are deductible.
  • Fees for doctors. Most doctors charge a fee to complete forms for camp now. If those are part of your medical care, they are deductible.

Make sure you save receipts for camp and ask for the camp’s taxpayer identification number. You’ll need that number and the camp address to put on your tax return as substantiation of the expenses for the dependent care tax credit. Save the receipts as back up. For the workplace FSA, you need the camp address and a receipt or a signature of the camp director.

For more information, including rules for claiming this credit for your spouse or a dependent age 13 or over who is not able to care for himself or herself, check out IRS Publication 503, Child and Dependent Care Expenses. This publication is available below or by calling 800-TAX-FORM (800-829-3676).

 

Additional IRS Links on Deducting Summer Camp Expenses on Tax Return:

IRS Publication 503, Child and Dependent Care Expenses

YouTube Videos on Deducting Summer Camp Expenses on Tax Return:

Summer Day Camp Expenses – English  | Spanish    | ASL  

Five Important Tax Credits

Check it out! You might be eligible for a tax credit. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are even refundable. That means you might receive a refund rather than owe any taxes.

 

Five Important Tax Credits

Here are five popular credits you should consider before filing your 2008 Federal Income Tax Return:
(links to download the forms below)

1. The Earned Income Tax Credit is a refundable credit for low-income working individuals and families. Income and family size determine the amount of the credit. For more information, see IRS Publication 596, Earned Income Credit.

2. The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, to enable you to work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses.

3. The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.

4. The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is designed to help low- and moderate-income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan. The Saver’s Credit is available in addition to any other tax savings that apply. For more information, see IRS Publication 590, Individual Retirement Arrangements (IRAs).

5. Health Coverage Tax Credit. Certain individuals, who are receiving certain Trade Adjustment Assistance, Alternative Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a Health Coverage Tax Credit when you file your 2008 tax return.

There are other credits available to eligible taxpayers. Since many qualifications and limitations apply to the various tax credits, taxpayers should carefully check their tax form instructions, the listed publications, and additional information that is available on the IRS Web site at IRS.gov. IRS forms and publications are also available by calling 800-TAX-FORM (800-829-3676).

Links to forms:

2009 Publication 596, Earned Income Credit (EIC)
Publication 972, Child Tax Credit
Publication 503, Child and Dependent Care Expenses
Publication 524, Credit for the Elderly and Disabled
Publication 970, Tax Benefits for Education
Publication 590, Individual Retirement Arrangements (IRAs)
Form 1040 Instructions