I will continue to do a WHAT’S THE BUZZ posting on Saturdays, and will “interrupt” the series if appropriate for “breaking” tax news.
Let’s start off with a post that is appropriate for the summer:
If both you and your spouse work, or if you are a working single parent, the cost of sending your dependent child under age 13 to a summer day camp is eligible for the Credit for Child and Dependent Care Expenses.
Only day camp expenses qualify for the credit. The cost of an overnight/sleepover camp does not qualify.
If you have one qualifying child you can claim the credit on up to $3,000.00 in expenses. For two or more qualifying children the maximum is $6,000.00.
The amount of child care expenses eligible for the credit is further limited to the earned income of the taxpayer or spouse. If one spouse earns $50,000.00 and the other $2,500.00, only $2,500.00 of expenses is eligible for the credit.
If one spouse works and the other is disabled or a full-time student, the non-working spouse is "deemed" to earn $250.00 per month if there is one qualifying child or $500.00 per month if there is more than one. This applies to only one spouse per month. If both spouses are full-time students during the same month, only one is "deemed" to earn the $250.00 or $500.00.
The amount of credit allowed depends on your Adjusted Gross Income. If your AGI does not exceed $43,000.00 the credit ranges from 35% to 21%. The credit is 20% if your AGI is more than $43,000.00.
In most cases, if you are married you must file a joint return to be able to claim the credit.
The credit is allowed for a dependent who is under age 13. However, you can claim the credit on expenses you have incurred up to the child's 13th birthday. If your child will turn 13 this November you can still claim the credit on any day camp expenses incurred during the summer.
Day camp costs also qualify for reimbursement under an employer-sponsored "pre-tax" Dependent Care Benefit plan. In most cases you will receive a greater tax benefit by running the day camp costs through your employer's "flexible spending" dependent care program than if you claim the credit.
If you will be claiming the credit on payments made for a summer day camp, be sure to get the name, address and Employer Identification Number of the camp when registering. You will need this information to complete Form 2441, the IRS form used to claim the credit.
Some states, such as New York, also allow a Child Care Credit on the state income tax return.