Summer. Just a few short weeks ago, those of you with school-aged children may have been wondering how to keep them occupied. When I was a kid, my mom would sign us up for summer day camp. Nothing fancy, not like you see in the movies where children are shipped off to Camp Chipmunk. But something to keep us as much out of trouble as possible without breaking the bank. If you signed your kids up for summer camp, and you did it so you could work and not have to worry about them, then there is a little bit of a tax break for you. It’s the same credit for working parents who have someone watch their children before or after school so they aren’t home alone.
There are a few rules (it is the IRS, after all) you have to follow. First, your child must be under 13 or disabled and unable to care for himself or herself. Second, it must be so you can go to work, or look for work. Third, if you are married, both spouses must be working and have income. If not, one spouse must be disabled and unable to care for your child or attending school themselves. Date night doesn’t count, sorry. Fourth, you have to collect information from the provider. In Flagstaff, most providers will give you the information at the end of the year with everything you need on one piece of paper: the provider’s name, tax ID number, who the care was for and how much you paid them. I like these providers, no searching for information on March 30 with a lobby full of waiting clients.
So, you think you might qualify for the credit based upon my abbreviated rules – Publication 503, which addresses this topic, is 20 pages – and wonder how much it might be worth. There are some basic limits to the credit:
- Total expenses cannot be more than $3,000 for one child or $6,000 for two.
- The tax credit amount is 35 percent if your AGI is $15,000 or less and phases down to 20 percent for returns with an AGI at or above $43,000.
- It is not refundable. If you don’t have a tax liability, this credit doesn’t put more money in your pocket.
Of course, this credit isn’t limited to summer camp, it’s just the time of year when many parents of school aged children will see an increase in their child care expenses. The same rules on working, disabled spouses, or spouses going to school apply. So, remember to keep your receipts and statements safely filed away with your W-2 for when you prepare your income tax return next year. And if you’re trying to figure out how to keep your child busy next summer, a few places to check out are: Lowell Observatory, Theatri-kids, Museum of Northern Arizona, Flagstaff Unified School District summer FACTS program. FBN
By Patrick Fleming, EA
Patrick Fleming, EA is a partner with Northern AZ Financial Services Co. For more information, visit
northernazfinancial.com or call 928-526-3999.