During the school year, your children may be in after school day care at the local center or, depending on their age, spend a couple of hours at home alone in the afternoon. You likely keep the monthly child care center’s bills in your tax files for the Child and Dependent Care Credit on your next year’s tax return. Easy! Not so fast. Now that it’s summer, the calendar is reshuffled.
Your kids may be attending a local summer day camp, at an overnight camp a few hours away from home, or perhaps your neighbor will be the babysitter at your home. Are these summer expenses eligible for your child care credit?
The day camp expenses are eligible. If the camp costs include a fee for transporting your kid to and from the camp, that’s an eligible cost, too. Before the camp days are over, get the camp’s information (official name, address, and identification number) so you can take the Child and Dependent Care Credit for the camp expenses when you file your taxes. The overnight camp costs are unfortunately not eligible for a tax break only day camp.
The dollars that you pay the neighbor can certainly be included in your child care costs. Let the babysitter know that you will be claiming your babysitting expenses on your taxes, so you will need her information just as you would a day care center or day camp. If you pay her $2,000 or more, you may be a household employer. If so, you may have to withhold and pay social security, Medicare, and federal/state unemployment tax on your payments to the neighbor.
If any of your children turn 14 during the summer, you can still claim the child care costs up until the day they turn 14. So if your son turns 14 on August 15th, you can still deduct his local camp costs through August 14th.
If you have your own business and your kids are old enough to do some work there, maybe you don’t need a sitter or camp this summer. You can employ your kids at a fair-market wage and deduct their wages as a business expense. If your business is a sole proprietorship or a partnership and your child is under age 18, the child’s wages are not subject to social security and medicare taxes.
Don’t worry about knowing any of these tax laws. TurboTax is up to date on tax laws and will get you the tax deductions and credits you are eligible for based on your answers to simple questions.