By: Lori T. Williams, Owner/Managing Attorney of Your Legal Resource, PLLC
I recall the days when my children were younger and I had to find something for them to do in the summer, while they were off school and I continued to run my business. Many business owner parents face this situation annually. The IRS offers some relief to taxpayers who pay for child care year round, or day camps throughout the summer.
1. Children must be under age 13 in order to qualify.
2. Taxpayers may qualify for the credit, whether the childcare provider is a sitter at home or a daycare facility outside the home.
3. You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.
4. The credit can be up to 35 percent of qualifying expenses, depending on income. If your adjusted gross income is over $43,000, then you are limited to 20% of the unreimbursed expenses allowed for the credit. See Form 2441 – Child and Dependent Care Expenses for a breakdown of the applicable percentages.
5. Expenses for overnight camps or summer school/tutoring do not qualify.
6. Save receipts and paperwork as a reminder when filing your 2012 tax return. Remember to note the Employee Identification Number (EIN) of the camp as well as its location and the date your children attended. For more information, see IRS Publication 503, Child and Dependent Care Expenses.
Cory Lee, CPA, CVA, of ShindelRock, specializes in serving clients in sectors such as medical practices and real estate, including construction, residential, office building, industrial buildings, and land development. Additionally, he provides tax research and advice to clients and oversees the preparation of business valuations, as well as individual, partnership and corporate income tax returns. Cory is a Michigan State University graduate and holds an MBA as well as a Master’s of Finance from Walsh College. For more information visit the company blog or website.