Claiming a Tax Credit for Summer Child Care Expenses

By Catherine Gordon, Toolkit Staff Writer

Summer is here, and many of us find ourselves facing the dilemma of finding and financing care for children during the school vacation. Even small business owners with flexible work schedules are likely to need some help with the kids during the long summer break. The fact that your summer child care expenses may qualify for an income tax credit can help ease your burden, at least financially.

Tax credits are particularly valuable because they save you more than tax deductions by reducing your tax bill dollar for dollar. This tax credit is available for certain types of child and dependent care expenses for a child up to age 13, or an older child who is physically or mentally challenged. How do you know if your summer child care expenses are eligible for the credit? The IRS has issued a checklist that is particularly applicable to expenses incurred for child care during the summer vacation:

• The cost of day camp may count as an expense for purposes of the child and dependent care credit.
• Expenses for overnight camps do not qualify.
• If your child care 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.
• The actual credit can be up to 35 percent of your qualifying expenses, depending upon your income.
• 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.

The rules above apply to child and dependent care expenses incurred throughout the year as well.

Tax credits for personal expenses are few and far between, and you should take advantage of summer child care expenses that may help you get a credit on your next year's tax return. To ensure that your expenses qualify and to claim the child care credit, you should complete Form 2441, Child and Dependent Care Expenses, and include it with with your annual tax return.

Making sure that your children and your business are well taken care of are priorities. Taking advantage of a tax break that you're entitled to should be one as well!