Send Your Kids To Summer Camp and Write It Off

If you paid someone to care for a child so you could work, you may be able claim a tax credit for child and dependent care expenses on your federal income tax return. This credit is available to people who, in order to work or to look for work, have to pay for child care services for dependents under age 13.

The credit is a percentage, based on your adjusted gross income, of the amount of work-related child and dependent care expenses you paid to a care provider. The credit can range from 20 to 35 percent of your qualifying expenses, depending upon your income.

For 2004, you may use up to $3,000 of the expenses paid in a year for one child or $6,000 for two or more children. These dollar limits must be reduced by the amount of any dependent care benefits provided by your employer that you exclude from your income.

To claim the credit for child and dependent care expenses, you must meet the following conditions:

1. You must have earned income from wages, salaries, tips or other taxable employee compensation, or net earnings from self-employment. If you are married, both you and your spouse must have earned income, unless one spouse was either a full-time student or was physically or mentally incapable of self-care.

2. The payments for care cannot be paid to someone you can claim as a dependent or to your child who is under age 19.

3. Your filing status must be single, head of household, qualifying widow(er) with a dependent child, or married filing jointly.

4. The care must have been provided for one or more qualifying persons identified on the form you use to claim the credit.

5. Your children must reside with you.

What is a "qualifying" child? The child must have been under age 13 when care was provided and you must be able to claim the child as an exemption on your tax return. A spouse who is mentally or physically unable to care for himself or herself also qualifies.

You should read IRS publication 503 or speak with a tax professional to learn more. Still, it is nice to know you can write off those swimming lessons.

Richard Chapo is CEO of Business Tax Recovery - Obtaining tax refunds for small businesses for overpaid taxes. Discovery tax strategies and deductions in our tax articles section.

In The News:


Deducting Points On Home Refinances

Deduction of Refinance PointsAny points that you pay in the... Read More

Requirements To Produce Tax Information (Whats Up With That?)

"What we've got here is a failure to communicate." ... Read More

How Home-Based Businesses Can Avoid Giving Uncle Sam More than His Share

How Home-Based Businesses Can Avoid Giving Uncle Sam... Read More

Complaince of Tax Return in Electronic Commerce Taxation

Emerging Legal issues of Tax compliance of e-business Self-assessment system... Read More

1031 Exchange Rules and Requirements

Following is a reproduction of the IRS's rules and requirements... Read More

State Tax Information

All states also have their own tax system. Typically there... Read More

How to Reduce the Estate Tax Using the A-B Revocable Living Trust

In a past article I relayed the plight of the... Read More

Car Donation: An Easy Way to Support Your Favorite Charity and Get a Tax Deduction

Most people look forward to getting their tax return, but... Read More

IRS Certifies 2006 Toyota Hybrid for Clean Fuel Deduction

The Internal Revenue Service has certified the 2006 Toyota Highlander... Read More

Surprising Truths About Tax Preparers

Choosing the right tax preparer for your business is a... Read More

Business Tax Loophole: Leasing Assets To Your Corporation

While there are many equally valid reasons to incorporate, saving... Read More

Business Tax Deductions

As we enter mid-March, taxpayers begin to become very interested... Read More

Tax Trap #2 -- Double Taxation: Isnt Once Enough?

Have you been thinking about incorporating your small business or... Read More

How To Get An Extension To File Your Business Tax Returns

Yes, the tax season is upon with the first filing... Read More

What is a Federal Tax Lien?

A Federal Tax Lien (FTL) is a legal instrument that... Read More

Access to E-records by Taxing Authorities: A Case for Pakistan (Part I)

Background issues of access to recordsTo assess the records at... Read More

Tax Jokes and Quotes

Do you realize that some tax forms ask you to... Read More

Need a Copy of Your Tax Return Information?

Taxpayers have two easy and convenient options for getting copies... Read More

Corporations Failing To Claim AMT Exemption Overpay Taxes By $11,000

Does your incorporated business pay alternative minimum tax ["AMT]? If... Read More

Your IRS Tax Appeal Rights

Are you in the middle of a disagreement with the... Read More

Keeping Your Own Money ? NOT Handing It Over To The Taxman

Most people trying to make a crust online (or offline... Read More

What You Need To Know About Taxes If You?re Getting Married

It may not be high on the list of wedding... Read More

Some Folks Pay A Lot Less Tax Than Others On Very Same Income?Did You Pay Too Much Tax In 2004?

Someone once remarked, "Next to being shot at and missed,... Read More

Tax Audits: What Signs Make You More Likely to be Audited by the IRS?

It's a major fear for most Americans: A notice from... Read More

Estate Taxes - It Pays to Plan Ahead

Estate taxes. It's not enough to simply know they exist,... Read More