Child Care Credit

Ten Forty + Quality Tax Preparation & Financial Services 281-397-7777 Fax 281-397-7443 Tax Tips Going back to school? What you need to know about the child care credit 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 underage 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. What expenses qualify for the child care credit? The credit can be claimed for: Babysitters Day care centers Nursery schools Summer day camps (but not overnight camps) How do you 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. 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. Please call us if you have any questions. 2016 Tax Extension Deadlines are approaching. Go to www.tenfortyplus.com and complete your online organizer (under forms and documents). Make your appointment using our online appointment system. Call 281-397-7777 and get a user id with password set up so you can send us all your information through our online secure portal and do your taxes from the comfort of your home or office or come see us at our office. 1040 + Quality Tax Preparation & Financial Services Joseph C Becker EA www.tenfortyplus.com 281-397-7777, Fax 281-397-7443 joeb@tenfortyplus.com Contact Us There are many events that occur during the year that can affect your tax situation. Preparation of your tax return involves summarizing transactions and events that occurred during the prior year. In most situations, treatment is firmly established at the time the transaction occurs. However, negative tax effects can be avoided by proper planning. Please contact us in advance if you have questions about the tax effects of a transaction or event, including the following: • Pension or IRA distributions. • Retirement. • Significant change in income or • Notice from IRS or other deductions. Revenue department. • Job change. • Divorce or separation. • Marriage. • Self-employment. • Attainment of age 59½ or 70½. • Charitable contributions • Sale or purchase of a business property in excess of $5,000.