Don't Mess With Taxes

UPDATE, March 7, 2018: No, it's not hot yet, even here in Texas. But parents across the country already are making summer camp plans for their kids since some of the programs fill up quickly. And the child and dependent care tax credit, which survived the Tax Cuts and Jobs Act enacted on Jan. 1, 2018, can help cover some of those costs as long as the camp is of the day-only variety. This oldie-but-goody (and reviewed and refreshed) tax tip has the scoop.

If the hot weather hasn't already tipped you off, all the kids roaming the streets make it clear that summer is here.

Yep, as Alice and friends say every year, school's out for the summer.

And that is a big problem for a lot of parents. When mom and dad have to go to the office, even one that's in the home, they need help watching the kids.

Thank goodness for day camps.

These popular summer programs are win-win-win for kiddos and their parents.

Myriad day camps occupy, entertain and, in many cases, educate kids.

Mom and dad can head to work knowing that their youngsters are supervised for most of the work day.

And the third win? That comes at tax time when parents can count day camp costs when they total expenses that can be claimed as part of the child and dependent care tax credit.

This credit, which is today's Weekly Tax Tip, lets taxpayers count up to $3,000 for the care of one kid (or other dependent person) and $6,000 for two or more.

Percentage limits: Unfortunately, you don't get to use those dollar amounts as your credit claim. Instead, you get to claim a percentage of your dependent care expenses.

Just how large a percentage -- a range from 35 percent to 20 percent -- depends on your income. Lower earners, those making $15,000 or less regardless of filing status, get to claim 35 percent of their eligible child care costs. Filers who make more than $43,000 can claim only 20 percent of their costs.

Details on the percentage phaseout can be found on Form 2441, which you use to claim the credit.

That means the maximum child and dependent care credit is $2,100:

$6,000 spent on care for three kids
  x 35%
$2,100 child care tax credit claim

Yes, $2,100 is not much in the grand scheme of child care costs. But it's something.

And it's a tax credit, meaning that it reduces your tax bill dollar-for-dollar. It can zero out your tax bill, but because it's nonrefundable you won't get any excess credit back from the Internal Revenue Service.

Other child care credit rules: In addition to the earnings limits, keep in mind the other child care credit rules.

Day camp costs only are allowed. You can't count the usually higher expenses of sleep-away camps.

Your kid, either at day camp now or after-school care when classes are in session, must be 12 years old or younger.

The kiddo also must be your dependent.

And the parents claiming the credit must work or be looking for a job. If you're married, that means both of you have to be employed or seeking work. The only exception is when one spouse is either a full-time student or is physically or mentally incapable of self-care.

So if you just want a break from the ever-present kids during the summer, sorry. You can still send them to day camp, but Uncle Sam isn't going to help you cover the cost.

You also might find these items of interest:

• Double check dependents, filing status
• Tax breaks for dad on this Father's Day
• Children offer tax break and tax fraud opportunities