DiSabatino CPA Blog

DiSabatino CPA Blog

A blog by Michael DiSabatino CPA with topics on Tax Savings, Business, Management and more...

Make Your Child's Summer Break a Tax Break

As a busy working parent, you may be concerned about what activities are available for your kids this summer. There may be a solution that’s also a tax break: summer camp!

Using the Child and Dependent Care Credit, you can be reimbursed for part of the cost of enrolling your child in a day camp this summer.

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IRS issues reminder on child tax credit

IRS Issues Reminder on Child Tax Credit

Working parents should be aware that the child and dependent care tax credit is available to offset some of the expenses for child care. Six facts the IRS wants taxpayers to know about the credit:

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Life Events That Matter: A New Birth

Life Events That Matter: A New Birth 

here are big moments in everyone’s life. A new birth is one of them. The irony is that most life events also have tax consequences attached to them. When a new member is added to your family or someone you know, here are some tips to consider.

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Let the tax man help with child care costs

Let the tax man help with child care costs

Are you a working parent looking for ways to ease the burden of child care expenses? There are several tax-saving strategies available to you.

First, there's the dependent care tax credit, a direct reduction to your tax liability.

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Maximize the Child & Dependent Care Credit

The Child & Dependent Care Credit provides a reduction in taxes to offset the cost of daycare when you are employed. The maximum amount of the credit is $3,000 for one dependent or $6,000 for two or more qualifying persons.*

To take advantage of the credit here is what you need to know.

  1. Qualified dependent(s). Your dependent must be under the age of 13. A spouse or older dependent who is physically or mentally unable to care for themselves can also qualify.
  2. Earned Income. You must have earned income to support the credit.
  3. Qualified daycare expenses. You must actually incur the care expense for the qualified dependent.
  4. Financial support requirement. You must maintain the home and financial support for the qualified dependent (more than half the cost and more than half the year).

Here are some tips;

  • Partial expense coverage. The credit only covers a percentage of your qualified care expenses. The amount depends on your income with a high of 35% of qualified expense down to a low of 20% of the daycare expense.
  • Obtain proper ID. Most daycare organizations will provide you with an expense summary at the end of each tax year. This form will tell you how much you spent in care and will provide you with the proper tax id for their organization. If you have someone else caring for your dependent, make sure you receive their tax information. It will be needed when you file for the credit on your tax return.
  • Not equal. If you have two or more qualified dependents, the daycare expenses do not have to be equal for each of them. For example, you could use $5,000 for one dependent and $1,000 for the rest of them.
  • Education expenses. Pre-school, nursery and other educational programs can qualify if levels are lower than kindergarten. Full-day kindergarten fees DO NOT qualify.
  • Leverage summer. Summer day camps and similar activities can qualify for the credit. So too can hiring a nanny to care for the kids while you are at work and the kids are out of school.

Other details apply. Please ask for help if you wish to review your situation.

*Note: If your employer provides daycare reimbursement as a benefit on your W-2, the employer benefit is limited to $5,000 or $2,500 if married filing separate or single. You can still use excess daycare expenses to maximize your credit to the full $3,000/$6,000 amount.

Call us if you have questions about the tax consequences of employing family members.

DiSabatino CPA
Michael DiSabatino
651 Via Alondra Suite 715
Camarillo, CA 93012
Phone: 805-389-7300

This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here.  All rights reserved.

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Parents can cut taxes with child-related credits

Parents can cut taxes with child-related credits

Are you a parent? Give yourself some credit – a child-related tax credit, that is. Here are two that can reduce your 2013 federal income tax liability.

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