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Keep the Child and Dependent Care Tax Credit in Mind for Summer Tax Planning

[1]During the summer many parents can plan the time between school years for their children while they work or look for work. Taxpayers that are considering their summer agenda should keep in mind a tax credit that can help them offset some day camp expenses.

The Child and Dependent Care Tax Credit is available for expenses incurred during the summer and throughout the rest of the year.  Here are six facts the IRS wants taxpayers to know about the credit:

1. Children must be under age 13 in order to qualify.

2. Taxpayers may qualify for the credit, whether the childcare provider is a sitter at home or a daycare facility outside the home. 

3. You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

4. The credit can be up to 35 percent of qualifying expenses, depending on income.  If you adjusted gross income is over $43,000, then you are limited to 20% of the unreimbursed expenses allowed for the credit.  See for Form 2441 – Child and Dependent Care Expenses [2] for a breakdown of the applicable percentages. 

5. Expenses for overnight camps or summer school/tutoring do not qualify.

6. Save receipts and paperwork as a reminder when filing your 2012 tax return. Remember to note the Employee Identification Number (EIN) of the camp as well as its location and the date your children attended.

For more information you can review IRS Publication 503, Child and Dependent Care Expenses [3], or just give us a call [4]