Child Care And Dependent Care Tax Credits For 2013, 2014

Any employed parents should already know about the child care tax credits they can receive to pay babysitting or childcare costs while they are at work. The same types of tax breaks apply to summertime camps as well.

Day camps provide childcare and some educational resources for children whose parents work. They are used most often in the summertime school vacation, but are also used for school holidays throughout the year. The IRS deems day camp costs eligible for some of the child tax credits parents and guardians can get each year.

It does not matter when you pay for the childcare during the year. You can still add up all the costs when it comes to tax time and figuring out if you can receive the Child and Dependent Care tax credit to save money on your taxes.

In order to get the childcare tax credit, you can only earn and spend within certain limits. These limits reduce the total amount you actually get from the tax credit. It is also vital to be sure the person you get the care for does qualify according to the IRS.

Cost Limits for Child Care

The tax credit is not designed to reimburse you for your entire childcare costs. You will only get a credit for a percentage of the total yearly daycare or babysitting fees. In addition, the IRS only allows a certain amount of expense to be claimed. For one child, the limit is $3,000. For two or more children, you can claim up to $6,000. Luckily, you can add together the care costs for as many kids as you have until it reaches this limit. This amount is variable based on your yearly income as well.

For example, if you have two children named Bob and Mary, you can add the amounts together in the most sensible way to reach the $6,000 limit. Their parents could count $3,100 for Bob’s care and $2,900 from Mary’s to get to the limit. Parents will get a bigger tax credit from the Child and Dependent Care rules if the combine their kids’ costs together.

Restrictions on How Much You Can Claim

Once you add up the childcare costs to see how much you can claim, you need to figure out the percentage that will form the tax credit. No matter how much you actually pay, the most you will get a credit for is 35% of that amount or $1,050 for one person and $2,100 for more than one. If your income is higher, you may only get back 20% of your costs.

The percentage is based on income, with a gradual decrease as income goes up. The 35% rate is for people making around $15,000. You will not get a child care tax credit if you make more than $43,000 per year.

Further cuts to the credit could happen if you do not owe very much in taxes. The childcare tax credit is not refundable, so if you owe no taxes, you get no credit. If the childcare credit is higher than your tax bill, you will simply have to pay nothing instead of getting a tax refund check.

Who Qualifies as a Dependent?

It is important to make sure your child or dependent qualifies under the IRS guidelines if you want to get the tax credit.

The child who receives the care must be under 13-years-old. See the IRS website or forms to make sure they qualify as a child according to the federal government. He or she must be related to you in some way – biologically, by marriage or adoption – and you must be responsible for their care and shelter. If you are divorced or legally separated, the rules may differ. Always be sure to read everything clearly before filing your taxes.

You May also Qualify for the Child Tax Credit

The Child Tax Credit allows a credit up to $1,000 per child for qualifying taxpayers.  You must be able to claim a child as a dependent and meet other additional requirements.

Although there is not a limit on the number of children claimed, claiming multiple children may subject you to the Alternative Minimum Tax or AMT.

The child must be your daughter, son, adopted child, foster child, step child, brother, sister or descendant of any of the above. This child must live with you for more than half a year to claim the child tax credit.

The child must be under the age of 17 and the child may not have contributed to more than half of their own support.  Also this child must be younger than yourself and be either a citizen or resident alien of the U.S

The Additional child tax credit refers to tax refunds for families in the United States where the child tax credit exceeds the family’s tax liability.

How TurboTax Can Help

When you file your taxes with TurboTax we help you get your biggest refund by asking you simple questions, showing you which tax credits and deductions you qualify for and recommending the best choices for maximizing your refund. Try their free tax refund calculator to see how big your refund will be.

Remember, when you file your taxes with TurboTax, you don’t need to know which tax forms to fill out. We’ll ask you simple questions about your life and put your answers on all the appropriate tax forms.

Any article post about Child Care.

Published at: Articlicious Article Directory

Click here for Article Source

%d bloggers like this: