In the words of Alice Cooper, School’s Out for Summer.
Besides no more pencils and no more books, it also means no more supervised classroom program to look after Junior while you work.
Luckily, the IRS provides opportunities to reap the benefits of the child care tax credit even though your children are out of school on hiatus during summer vacation.
As most people know, working parents who put the kids in day care can file for the child care credit to recoup some of those costs – up to $3,000 spent to care for one youngster under age 13, and $6,000 for two or more preteens.
In addition to day care, sending Junior to summer day camp (not overnight camp) also qualifies for the child care credit. There are also some other care services that are eligible for the child care credit:
- Licensed dependent-care centers.
- Nursery school and kindergarten costs. In these cases, if the costs of school are separate from child care expenses, only the child care portion qualifies.
- Household help as long as the services are necessary for the well-being and protection of the qualifying individual.
To qualify for the credit, you’ll need to meet the following general guidelines:
- The care must have been provided so that you and your spouse (if filing jointly) can work or look for work.
- You and your spouse (if filing jointly) must have sources of earned income, such as salaries or self-employment earnings.
- Beside the IRS limiting the dollar amount you can claim (see above), the IRS also phases out the amount of the credit depending on your income.
- Regardless of how much you pay, the potential maximum child and dependent care credit is $1,050 (35 percent of $3,000) for the care of one person, twice that for two or more. Depending upon your income, the percentage range drops from 35 percent to 20 percent of your allowable care costs.
- The 35 percent rate is only for lower-income taxpayers. If you make more than $15,000, the credit percentage is incrementally phased down by salary range until it hits 20 percent for those earning more than $43,000.
And contrary to how the song goes, fortunately school won’t be out forever.