Summertime Tips on 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. Here are five facts to know about tax credits available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the lazy hazy days of summer and throughout the rest of the year.

  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.

Other items you need to consider.

  1. In order to qualify for the deduction you must have earned income. If you are married both you and your spouse must have earned income. There is an exception to the earned income requirement when one spouse is disabled.
  2. Even if your childcare provider is a sitter at your home you will need to have their social security number or EIN.
  3. If you pay someone to come to your house to care for your dependent you may be a household employer. If the person who comes to your home is self-employed you are not considered a household employer. A household employer must have an EIN and may have to pay employment taxes.

Please contact us if you have any questions about the child care credit or household employment taxes.

4 thoughts on “Summertime Tips on Child Care Expenses”

  1. This is some really good information to know about child care expenses. I had no idea about the EIN things you talked about. My sister needs to have someone watch my nephew this summer and dealing with the EIN thing sounds like it would make her busy life even more complicated. It might just be easier if you take your kid to a daycare facility.

    1. Thanks for your post. I’m glad you found the article useful. Let us know if we may be of further assistance.

  2. I’ve been trying to figure out what I can do to make my child care expenses a little more affordable in the summer, and these were some great tips. I think understanding deductions are a great way to make the most of a situation. You obviously want to make sure that you’re not choosing a child care center based solely on cost, but I thin it should factor in to the decision. Thanks for sharing.

    1. Thank you for your comment. Another option might be to ask if your employer offers a dependent care reimbursement plan. A dependent care reimbursement plan allows you to make pre-tax contributions from your pay up to $5,000 per year. This option saves income and social security taxes on all amounts contributed and used for dependent care.

Leave a Reply

Your email address will not be published. Required fields are marked *