The kids are out of school, which means now is a great time to review the rules to deduct eligible summer activities on your tax return. Tax deductible related daycare expenses through the use of the Child and Dependent Care Credit can be a great opportunity to reduce your child care expenses this summer. Here is what you need to know.

What is deductible?

The credit equals 20% to 35% of qualified unreimbursed expenses with a maximum amount of expenses being $3,000 for one person (maximum credit of $1,050) and $6,000 for two or more qualifying persons (maximum credit of $2,100).

How it works

To receive the credit you must:

  • have a dependent under the age of 13 or have a spouse or dependent who is physically or mentally unable to care for themselves
  • have earned income (wages) to support the dependent
  • have qualified expenses (that allow for care while you work or look for work)
  • financially support and maintain a home for the dependent
  • if married, both you and your spouse must be working or looking for work

Some summertime tips

  1. Daycare expenses are the most common qualifying expense for the Dependent Care Credit.
  2. In-home daycare during the summer months also qualifies. Your sitter cannot be a dependent, a spouse, or someone under the age of 19.
  3. Day camps qualify for the credit.
  4. OVERNIGHT camps and summer school/tutoring do NOT qualify.
  5. Track the mileage of transportation to and from any qualified activity. For instance, if your daycare provider takes the kids on a field trip, the mileage would be part of the qualified activity.
  6. Even cooking and housekeeping expenses can count if at least partly done for the protection and safety of a qualifying person.
  7. Placing your child in a day camp while one of you volunteers at a charity would not work in determining qualified dependent care expenses.

Remember to get the provider’s name, address, and Social Security number/Tax ID number. Also retain any receipts and canceled checks to support your proof of payment. This information will be required when you fill out your tax return.

Contact us.