Don't Mess With Taxes

With Father's Day this Sunday, I thought a look at child care options might be appropriate.

"Huh?" you ask. OK, I'll elaborate. The hubby is smiling, thinking "Finally, someone else gets to listen to one of these convoluted explanations!"

Hubby's implicit reader warning notwithstanding, here goes.

My dad was a great father. But when my brother and I were growing up, a dad's primary responsibility was to take care of us financially. So my father worked hard, often on weekends, and brought home the paycheck. That meant we didn't get to spend a whole lot of time with him.

When we finally did get together, it definitely was noteworthy. Dad was generally a quiet man, but he had a wonderfully offbeat sense of humor.  He also liked to challenge us, even when we were quite young, to think about things in different, not-so-obvious ways.

And he was a great story teller. When he was able to help tuck us in at night, rather than read us the standard bedtime story from one of our books, he would make up his own tales. He would incorporate the day's happenings, people we knew and our favorite television shows into wildly improbable and entertaining yarns.

For most of our waking hours, though, our care and supervision was my mother's responsibility. That's not to say we lived the "Leave it to Beaver" lifestyle. But back then, which I swear was not that long ago, it took only one working parent to live comfortably.

Today, however, most families find they need income from both mom and dad. And that means the kids, once school is out, have to depend on care from someone else.

Voila! We now have come around, via the tangled story-telling style I obviously inherited from my dad, to the day care connection of today's post. You can quit smiling now, dear husband!

Older kids tend to head home to wait alone until the folks get off work. It's usually just a couple of hours and parents trust their children not to do anything totally idiotic for that short time.

Other parents, especially with younger children, have after-school care arrangements to watch the kids for a few hours each week day.

But now it's summer. School's out and the 3-to-6 p.m. post-classroom plan isn't going to cut it. The kids have whole days to while away and they need adult oversight.

So lots of working parents opt for day camps. Such is the case for fellow Austinite Don, who describes here the juggling act of multiple day camps that he and his wife decided on to occupy, and supervise, their son this summer.

It's not an ideal arrangement, but you might at least be able to get a bit of tax-saving help from good ol' Uncle Sam. That child and dependent care credit that you claim for the after-school program also applies in many cases to summer day camps.

Fellow tax writer William Perez at About: Tax Planning notes that "summer camps for kids age 12 and younger could qualify as child care facilities if the camp program enables you to work or to look for work. This tax strategy might also work if you send your kids to stay with relatives. As long as the trip enables you to work or to look for work and the relative isn't your dependent, you could use the trip as a qualifying childcare expense."

Bob Scharin, Senior Tax Analyst at tax publisher RIA, points out some seasonally relevant aspects of the dependent care credit rules:

• Day camp program fees are OK, but overnight camp costs are not.
• You can count any fee charged by the camp to transport your child, but not payments you make to a neighbor to drive the local youngsters to and from the program.
• In general, food expenses are not eligible. But if the lunch or snacks are "incidental to and inseparably a part" of the camp program, then the full cost, food included, counts toward figuring the credit.

Scharin also notes that your child's tax credit eligibility also is determined on a daily basis. That means if Billy or Bonnie turns 13 on Aug. 1, the June and July days spent at the day camp still qualify.

And the IRS won't penalize you if you have other, free options available. "That means even if grandma provides free child care during the year, you can give her some time off and get a tax credit by sending your child to day camp," says Scharin.

Now the not-as-good news. When you file for the credit on your 2006 tax return next year, don't expect it to completely to pay for what you shelled out this summer.

In figuring your credit amount, you're limited to $3,000 in expenses for care of one child or $6,000 for two or more. Even then, you only get a percentage of that amount back. Just how big a percentage depends on your income; the more you make, the lower the credit.

You can read specifics on claiming the credit in this story I did for Bankrate.com.

But it is some help. And it's a credit, meaning it will actually reduce your tax bill, not just provide you with a deduction to lower your taxable income.

Make sure Dad knows about this tax-saving opportunity. It might be a nice little bonus gift you can give him on Sunday.

Cinematic Dads: If you want to spend some time with pop this weekend watching a flick with a parental theme, there's obviously the one from this entry's title, Daddy Day Care.

Some of my other favorites:

-- Mr. Mom, with Michael Keaton pre-Batman.

-- Robin Williams' exploration of frumpy feminine attire in Mrs. Doubtfire. 

-- Evelyn, where Pierce Brosnan gets to play the caring dad in this based-on-a-true-story flick.

-- Happily combined families in two versions of Yours, Mine and Ours;  2005's interpretation with Dennis Quaid as dad, Rene Russo as mom, or the 1968 production with Henry Fonda and Lucille Ball as the parents of the growing brood.

-- Hijinks ensue in the Ron Howard/Steve Martin collaboration Parenthood. 

-- Classic dads or granddads and fans of classic films should enjoy Father's Little Dividend, with Elizabeth Taylor and Spencer Tracy reprising their Father of the Bride roles. 

-- And finally, there's the darker Hide in Plain Sight, another true story about a divorced dad trying to find his kids who've gone into witness protection with their mother and her new mobster husband. James Caan stars and makes his directorial debut, in this intriguing look at how the judicial system can twist the lives of those not even involved in it.

Happy viewing and happiest of days to all the dads out there!