Deducting Summer Activity Expenses

-Courtesy of the CPA Firm of David M. Spitzberg
http://www.cpaforbusiness.com

Don’t forget to save receipts!

The kids are out of school and summer is well underway. Make sure you understand the rules regarding the tax deductibility of summer activities and related daycare expenses through the use of the Child and Dependent Care Credit. Collecting those receipts now can save plenty during tax time.

What is deductible? 20 to 35% of qualified unreimbursed expenses with a maximum amount of $3,000 for one person and $6,000 for two or more qualifying persons.

To receive the credit you must:

  • Have a dependent under the age of 13 or have a spouse or dependent who is physically or mentally unable to care for themselves
  • Have earned income (wages) to support the dependent
  • The expenses allow for care while you work or look for work
  • Have qualified expenses
  • Financially support and maintain a home for the dependent
  • If married, both you and your spouse must be working or looking for work.

Some summertime tips:

  1. Daycare expenses are the most common qualifying expense for the Dependent Care Credit.
  2. In-home daycare during the summer months also qualifies. Your sitter cannot be a dependent, a spouse or someone under the age of 19.
  3. Day camps qualify for the credit.
  4. OVERNIGHT camps and summer school/tutoring do NOT qualify
  5. Track the mileage of qualified transportation to and from any qualified activity. For instance, if your daycare provider takes the kids on a field trip, the mileage would be part of the qualified activity.
  6. Even cooking and housekeeping expenses can count if at least partly for the protection and safety of a qualifying person.
  7. Placing your child in a day camp while one of you volunteers at a charity would not work in determining qualified dependent care expenses.

Don’t forget to get the provider’s name, address, and Social Security number/Tax ID number. Also retain any receipts and canceled checks to support your proof of payment. This information will be required when you fill out your tax return.

 

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