Posted by : Daniel Stoica in (Articles, Child Tax Credits, Income Taxes, Tax Topic) On: August 20th, 2011
Tagged Under : accounting professional, AGI, credits, Daniel Stoica, dependent care credit, expenses, IRS, joint return, kindergarten, tax professional, taxpayers
The new school year is here and many parents will be enrolling their children in school for the first time, as kindergartners. Some taxpayers have questioned whether they can claim the dependent care credit for full-day kindergarten as well as after-school programs.
In order to qualify for the dependent care credit, you must have paid for the care of your dependent child who is under 13 years of age, and you must be employed. Married taxpayers will be considered employed if at least one spouse is working full-time and the other works either full or part-time, or is enrolled in school as a full-time student. If you are married, you will have to file a joint return in order to claim the credit.
The percentage for the credit is 35% of your eligible expenses when you have an adjusted gross income (AGI) of $15,000 or less. For every $2,000 beyond this AGI, the credit will be reduced by 1%, but cannot drop below 20% for an AGI of $43,000 or more.
You can take the credit for the first $3,000 for one child, and $6,000 for two or more children. For taxpayers whose income is more than $43,000, you can qualify for $600 for one child and $1,200 for two or more children. Qualifying expenses are defined as payments toward babysitters, day care and pre-school. According to the IRS, summer day camp may also qualify for the credit, but not overnight camp.
Some have argued that parents who have to pay tuition for full-day kindergarten should be allowed to deduct some of those costs, but a 2007 IRS regulation stated that kindergarten is education and parents cannot take a credit for tuition costs.
The same is true for half-day kindergarten. However, if a parent pays for before- or after-school programs for a child who is in half-day kindergarten, those expenses are eligible for the credit.
Taxpayers need to take these credits into consideration when they are placing their children, aged 13 or younger, in the care of others. The credits can be a real money saver.