For working parents, money spent on child care may qualify for a tax credit. In 2007, this "child and dependent care credit" can be claimed for up to $3,000 that you spend on care for one child under age 13. If you’re paying for more than one youngster, the credit can be claimed for up to $6,000 worth of expenses.
To get the tax credit, you must pay for care that enables you or your spouse to work or to go to school full-time. The person you’re paying to watch your child can’t be someone you can claim as a dependent on your tax return.
Home care or day care costs are covered. That includes expenses for day camp but not overnight camp. Assuming your adjusted gross income (AGI) is over $43,000, the credit rate is 20 percent.
Suppose your AGI is over $43,000 and you spend a total of $8,000 on child care this year, for children age 2 and 5. The first $6,000 that you spend is eligible for a 20 percent credit, which will save $1,200 in tax: 20 percent of $6,000.
