As summer draws near, parents of young children may have to make arrangements for day care while school is out. When making such decisions, keep in mind that money that you spend for this purpose can qualify for a dependent care tax credit.
Under the tax code, up to $3,000 that you spend on one child under age 13 will qualify for this tax break. For more than one child, expenses up to $6,000 may earn a credit.
To qualify, you must pay someone or some entity to care for a child in order that a parent can work or go to school full-time. Covered expenses include home care or day care or day camp. You can’t claim the credit for money you spend on overnight camp, though.
Assuming you family income is over $43,000, the credit rate is 20 percent. Parents with lower incomes can get a credit rate as high as 35 percent
Suppose, for example, you and your spouse both work and your family income exceeds $43,000. This summer, you send your two young children to day camp, paying $5,000 in fees. You can save $1,000 in taxes–20 percent of $5,000–with the dependent care credit.
