October 18, 2017 | Posted in:

Back to School Means Back to a Focus on the Child Care Credit

Alloy Silverstein’s Tax Tip of the Week

A couple can claim the Child and Dependent Care Credit — commonly called the “child care credit” for short — if they pay someone to watch the kids while they’re at work. But suppose one spouse plans to go back to school this fall. Can you still claim the credit? It depends.

Generally, the credit is equal to 20 percent of the first $3,000 of qualified expenses related to caring for one child under age 13, or $6,000 for two or more children under age 13. Therefore, your maximum credit is typically $600 for one child and $1,200 for two or more children. A higher percentage is available for certain low-income taxpayers.

Eligible care expenses

What expenses qualify for the child and dependent care credit? The credit can be claimed for:

  • Babysitters
  • Day care centers
  • Nursery schools
  • Summer day camps (but not overnight camps)

Ask your CPA: How do I qualify for the child care credit?

To qualify, the expenses will need to have been incurred for you and your spouse to be “gainfully employed.” A married couple is gainfully employed if one spouse works full time and the other works full time, part time or is a full-time student. A full-time student attends classes for at least five months (not necessarily consecutive) out of the year.

Further Reading: Childcare Service – Tax Credit or Flexible Spending Account? by Ren Cicalese III

Say your spouse took a four-week course earlier this year and now has enrolled full time at college, beginning in September. You’ll end up with child care costs because your spouse will be at school and you work full time. That means you might claim the child care credit, subject to the usual limits.

One more thing to remember — the qualified expenses are further limited to the earned income of the lower-earning spouse. This could affect couples where one spouse attends school. During the months a spouse is a full-time student, the tax law presumes an earned income of $250 for one child and $500 for two or more children.

Contact us for guidance and application to your individual situation →

© MC 2017 | “Tax Tips” are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.


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