Many parents pay for childcare or day camps in the summer while they work.
The costs may qualify for a federal tax credit that can lower taxes.
Here are 10 facts about the child and dependent care credit:
• expenses must be for the care of one or more qualifying persons. The dependent child or children under age 13 usually qualify. For more about this rule, see Publication 503, Child and Dependent Care Expenses at irs.gov.
• expenses for care must be work-related. This means the care must be paid for so a person can work or look for work. This rule also applies to a spouse if filing a joint return. The spouse meets this rule during any month they are a full-time student. They also meet it if they’re physically or mentally incapable of self-care.
• the filer must have earned income, such as from wages, salaries and tips. It also includes net earnings from self-employment. The spouse must also have earned income if filing jointly. The spouse is treated as having earned income for any month that they are a full-time student or incapable of self-care. This rule also applies if filing a joint return. Refer to Publication 503 for more details.
• as a rule, if married, the filer must file a joint return to take the credit. But this rule doesn’t apply if legally separated or if the couple lives apart.
• a person may qualify for the credit whether care is paid for at home, at a daycare facility or at a day camp.
• the credit is a percentage of the qualified expenses paid. It can be as much as 35 percent of your expenses, depending on income.
• the total expense that can be used for the credit in a year is limited. The limit is $3,000 for one qualifying person or $6,000 for two or more.
• overnight camp or summer school tutoring costs do not qualify. The cost of care provided by a spouse or child who is under age 19 at the end of the year cannot be included. The cost of care given by a person claimed as a dependent cannot be counted. Special rules apply if dependent care benefits are received from an employer.
• keep all receipts and records. Make sure to note the name, address and Social Security number or employer identification number of the care provider. This information must be reported when you claim the credit on your tax return.
• remember that this credit is not just a summer tax benefit. It may be able to be claimed for care paid for throughout the year.
For more on this topic, see Publication 503 on irs.gov or call 800-TAX-FORM to have it mailed.