Child care can be a significant monthly expense, as much as an average rent payment if you've got more than one child. The Internal Revenue Service is willing to help you out a little if you're struggling with these costs. The child and dependent care tax credit is nonrefundable, so it only does you any good if you owe the IRS money at the end of the year – it can erase or at least reduce your tax debt. It won't compensate for all of your child-care costs, and you must meet a lot of requirements, but after-school programs do count.
Qualifications for After School Care
This credit is limited to children age 12 or younger. This means if your child turns 13 in July, but attended after-school care through June, the costs count because she was only 12 when she attended the program. Teenagers don't help you qualify for the child-care tax credit. The IRS reasons that if a child is age 13 or older, she's perfectly capable of taking care of herself while you're away from home. Of course, an exception exists if she's disabled and can't be left alone. If you do plan to claim the credit, be sure you save documentation, such as a Kumon tax receipt, in case you're later audited.
Exceptions to the Tax Credit
One catch to the tax credit is that your child must attend the after-school program so you can work – just giving mom or dad some down time doesn't count. If you're married, both you and your spouse must work, or your spouse must be a full-time student. If you're involuntarily unemployed and job-hunting while your child attends the after-school program, this counts as well. Although it's a bit of a catch-22, you must also have earned income as one of the qualifications for after school care, and unemployment compensation isn't earned income. If you collect unemployment all year, you can't claim the credit for child care costs incurred while you looked for a job unless you also had some other source of income that qualifies. If you're married, both you and your spouse must have earned income unless your spouse is a full-time student.
Although the credit for child care isn't changing with the 2018 laws, the Child Tax Credit is doubling to $2,000 per qualifying child. The income thresholds for the after school care tax deductible are also increasing, so married couples filing jointly will be able to make up to $400,000 to still get the full credit.
In both 2017 and 2018, the after school care tax deductible is calculated based on up to $3,000 of your costs if you have one child, or up to $6,000 of your costs if you have two or more. You can add all costs of work-related child care – such as summer camps and services by private providers – to your after-school expenses to reach this total. Depending on your income, your credit is equal to a percentage of your costs. If your adjusted gross income is less than $15,000, you can claim 35 percent of your costs, or $1,050 maximum for one child. The percentage gradually drops off as you earn more, and if your income is $43,000 or more, you can only claim 20 percent. If you earned $43,000 and had $6,000 in child care costs for your two children, your credit would be $1,200. If you earned only $14,999, it would be $2,100.
Beverly Bird has been writing professionally since 1983. She is the author of several novels including the bestselling "Comes the Rain" and "With Every Breath." Bird also has extensive experience as a paralegal, primarily in the areas of divorce and family law, bankruptcy and estate law. She covers many legal topics in her articles.