Writing Off Childcare on Your Taxes

Mary Murphy, CPA from EFP Rotenberg joined Katrina Irwin on News 8 at Sunrise Monday.  She talked about writing off childcare and summer camp on your taxes. 

Available to taxpayer(s) who pay for care of their child or children under age 13 (or incapacitated child or spouse) while the taxpayer(s) works or looks for work, attend school or is disabled.
 Maximum amount of claimed expenditures is $3,000 for one child, or $6,000 for two or more children.
 Credit of claimed expenditures rate ranges from 20% to 35%   - depending on AGI.
o $0 - $15k  = 35%
o $43k - unlimited = 20%
 Maximum credit is worth $2,100 (35% of $6,000).
 Non-refundable.
 Filing status must be single, married filing jointly, head of household or qualifying widow(er) with a dependent child.
 Form 2441  - Name, social security number or employer identification number, address of provider and amount paid.  ** Request these this summer/fall as you enroll**
 Cannot be claimed on form 1040-EZ.
 IRC Sec 21    IRS Pub 503

ELIGIBILITY TEST:

o one or more qualifying person(s)
o taxpayer(s) must each have earned income (see definitions & limitations) during the year.
o enable taxpayer(s) to work or look for work, attend school or is disabled
o not eligible if paid to spouse, parent of child under age 13, a person taxpayer can claim as a dependent, or taxpayers child if under 19 at the end of the year

QUALIFYING INDIVIDUAL:

Taxpayers qualifying child who is 12 or younger and claimed as a dependent (special rules for children of divorced or separated parents) dependent of the taxpayer who is physically or mentally incapable of caring for himself and who has the same principle place of abode for over 1/2 tax year. Or taxpayers spouse who is physically or mentally incapable of caring for himself and who has the same principle place of abode for over 1/2 tax year.

Dependent care facilities
Household services - maid, housekeeper, babysitter or cook (with stipulations)
Nursery or Preschool costs - generally the care portion
Before or after school care costs as applicable
Day camp or sport camp (not summer school or tutoring)
Special school expense may qualify and may have medical deduction of excess

Additionally,  some employers offer Dependent Care Accounts which allows employees to set aside up to $5,000 of pre-tax wages (or employer contributions)  to be used to pay child care expenses. These accounts must offset with the credit claimed but can provide additional benefits to taxpayers.