Day camp costs could qualify for child care tax credit
Tuesday, May 01, 2018
Hello, May. You are indeed a very merry month, what with your longer days, warmer weather, lovely flowers and the impending end of classes.
Yep, all you parents were smiling until you got to the end of that sentence, weren't you?
School is far, far more than a day care for our children. But the fact that teachers and other educators keep an eye on kids for much of the day is a very consequential consideration for working parents.
That's why as the summer break nears, parents who haven't yet signed their kids up for a variety of school's-out activities are scrambling to find day camps that still have open slots.
Good luck. Truly. The most popular science, acting, music, math, cheerleading, TV/film stunt skills, chess, culinary and Frisbee (really!) camps already are packed. Still, you might be able to find a few with openings.
Regardless of which day camp(s) your children attend or how you finagled their enrollment, hang on to the receipts. They could help you claim the child and dependent care tax credit on your 2018 taxes.
Qualifying campers: In order to claim this tax credit, your young camper must be 12 or younger. The Internal Revenue Service says specifically "younger than 13."
The agency also explains that if the child turned 13 during the tax year, he or she qualifies for the part of the year he or she was younger than 13. So if Jimmy is 12 years and 11 months when day camp begins and ends, those costs count toward the credit.
Your camper also must meet the IRS' child dependent requirements. There are five factors, but basically, the youngster must be related to you and live with you most of the time.
There are, however, exceptions in the cases of divorced or separated parents. If that's your family situation, read the credit's Form 2441 instructions carefully or discuss the claim with your tax pro.
Employed parents only: Parents also must meet a key condition.
Moms and dads can claim the credit only for care of their dependent child/children that was necessary so that they could go to or look for work.
If you're married, both parents must be employed or seeking a job. The only exception is when one spouse is either a full-time student or is physically or mentally incapable of self-care.
Other credit conditions: And since it's the tax code, there are a few other requirements to meet before you can claim the child and dependent care credit.
Your taxpayer filing status must be single, head of household, married filing jointly or qualifying widow or widower with a dependent child.
The missing status is married filing separately, which, in most cases, is not allowed in the claiming of the dependent-care credit.
Also, the payments you make for child care cannot to someone you can claim as your dependent on your return, or to your child who is younger than age 19. So that rules out claims when certain family members are looking after the kids while you're at work.
Finally, make sure you use a care giver who's on the up-and-up. The reason? When you claim the child and dependent care credit on your taxes via Form 2441, you must enter the any caregiver's name and taxpayer identification number.
Some shady operators who are trying avoid meeting child care regulations might not want to share that information. And more important than the tax break, this reticence is a warning that you don't want those folks looking after your youngsters.
Credit calculations: OK, your kiddos qualify. You and the spouse are working. The camp has accepted your youngsters.
I hope your son or daughter is going to math camp so they can help you figure your credit amount.
That's right. You can't simply claim all the costs associated with the day camp. You have to do some figuring.
The child and dependent care credit is limited to up to $3,000 for the care of one kid and $6,000 for two or more youngsters. Then once you hit those amounts, you must do some calculations since only a percentage of the camp's (or other care option) costs count.
The precise percentage claim ranges from 35 percent to 20 percent, depending on your income. The less you make, the larger your claim.
Folks making $15,000 or less can claim 35 percent of their eligible child care costs. Parents making more than $43,000 can claim only 20 percent of their costs.
Once the calculations are done, the maximum child and dependent care credit claim for looking after multiple kids is $2,100.
Here's the math:
$6,000 spent on care for three kids
x 35 percent =
$2,100 child care tax credit claim
Not much, but dollar-for-dollar: I'm not a parent, but I know that $2,100 is not much payback for all the dollars spent on caring for your kids or paying someone to help with that task.
And if you've already paid for child care earlier this year to cover your child's hours after school until you get home from work, you might have already hit the credit expense limit.
But just in case, don't overlook the day camp costs.
And, oh yeah, note the repeated use of the adjective. Only the costs of day camps, not overnight camps a la Camp Granada (yes, I'm dating myself) or Moonrise Kingdom, count toward the tax credit.
But every little bit helps at tax time. And it's a credit, which is better than a deduction because a credit reduces your tax bill dollar-for-dollar.
Since it's nonrefundable credit, however, it won't get you any tax money back if you don't owe. But it can zero out your tax bill. I don't know of anyone who'd turn that down.
More May tax moves: Getting your kids into a day camp is not the only tax thing to think about this month. You can find more suggestions in the May Tax Moves listing over in the ol' blog's right column.
Just scroll down a bit and look for the red lettering under the countdown clock ticking off the remaining filing extension days and hours.
One of those possible tax moves, pegged to the upcoming Mother's Day celebration, deals with the help you give an aging parent. In these cases, note the full name of the care credit.
It's officially the child and dependent (my emphasis) care. You also can claim it if you pay for care of other IRS-qualified dependents so that you can work. This includes, for example, care for a spouse or a dependent of any age (like an elderly mom) who is incapacitated because of physical or mental limitations.
Give this credit and the other May Tax Moves a look. If they apply, use them. They could end up making your 2018 tax return filing next year a very merry time, too.
You also might find these items of interest:
- Loss of exemptions could cost some taxpayers
- Children offer tax break and tax fraud opportunities
- Adoption tax credit 2018 inflation amounts changed by new tax law
James, No, you do not need to itemize to claim the child and dependent care tax credit. You can take it, if you qualify, if you take the standard deduction or itemize. The credit claim is found in the "Tax, credits, and payments" section on page 2 of both the Form 1040 and Form 1040A tax returns. You do, though, have to fill out the added Form 2441 to figure your precise credit amount, again regardless of which deduction method your decided to use when you file. Kay
Posted by: Kay Bell | Monday, May 07, 2018 at 01:48 PM
You have to itemize in order to take advantage of this correct? Kind of a big deal, since I've read less than 1/3 itemize under the pre-2018 law and that number should drop considerably with the massive increase in standard deduction.
Posted by: James | Monday, May 07, 2018 at 10:59 AM