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Not All Parents Know Child Care Is Tax Deductible


Since not all parents know that the money they pay for child care can be applied to their taxes, you can make your facility an even more valuable asset to them by letting them know. Simply copy and hand out the pertinent parts of this article.

You can also further aid parents by providing them with a year end statement, if you are not doing so already. Always advise parents to save any receipts you provide.

According to the Internal Revenue Service, the Child and Dependent Care tax credit applies to child care, day care, summer camps and after-school programs.

The child care tax credit is a percentage, based on income, of the amount paid for child-care expenses incurred while working. The percentage can be as low as 20 percent and as high as 35 percent. Child-care expenses can be applied toward the credit up to $3,000 for one child and $6,000 for more than one child.

In order to claim the child-care tax credit:

The care must have been for a child who was under age 13 or a spouse/dependent who wasn't physically or mentally able to care for themselves.

You and your spouse must have received earned income during the year.

The provider cannot be one of your dependents. You need either the child care center's employer identification number or if an individual is the care provider, that person's Social Security number.

The child care must be work related. That means that child care was necessary in order for you or your spouse to work or look for work.

If you are divorced or separated, only one parent may claim a child as a dependent for tax purposes.

The credit is non-refundable --that is, it can only reduce a family's income tax liability to zero; any additional credit is lost.

The Child and Dependent Care credit also applies to care for dependents other than your children, for example, an aging parent.

Regardless of when you paid for child care during the tax year, you can apply those costs toward this credit to cut down on your tax bill.

It is always a good idea to have your taxes prepared or reviewed by a licensed, experienced professional.

The best place to quickly learn all you need to know about the Child and Dependent Care Credit is the IRS itself.

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