By: Fred Henrichs (12/1/11)
Since my next article for the Compass is not due until next April (which will be too late for most of you), I will use my space this time for my second annual discussion of a topic no one wants to think about until at least next month: TAXES!!! In particular, I want to remind you that many of our OMS families qualify for a child and dependent care credit that can be claimed by filing form 2441 with your tax returns next year.
What is a child care tax credit?
You are allowed to claim a tax credit for a percentage of the qualifying child care expenses you pay to OMS that allow you to work, look for work, or attend school full time. The percentages range from 20% to 35% and depend on your adjusted gross income (AGI). If your AGI is over $43,000, for example, you can claim a 20% credit. If your AGI is lower, you can claim a higher percentage.
Who is eligible for this credit?
You (and your spouse, if married) must have earned income during the year. Special rules apply if one spouse is a full time student. Ask me or check the references below if this applies to you.
What expenses qualify for this credit?
All tuition, before/after hours care, and summer camp payments are qualifying expenses for most OMS primary students. Tuition payments for elementary students are not qualifying expenses. Expenses for before/after hours care and summer camp for elementary students do qualify. OMS third year primary students are a special case. If you have a child in our third year primary program, talk with me and/or your tax advisor.
What are the limits on qualifying expenses?
1. Taxpayers with one child are limited to a maximum of $3,000 in qualifying expenses and taxpayers with two or more children are limited to $6,000 in qualifying expenses (except for the case shown in #2 below). For example, if you have qualifying childcare expenses of at least $3000 in this tax year and your AGI is over $43,000 you would get a tax credit of either $600 ($3,000 X 20%) if you have 1 child, or $1,200 ($6,000 X 20%) if you have 2 or more children. If your AGI is lower, you would get larger credits.
2. If one spouse earned less than $3000 (or $6000 if 2 or more children), qualifying expenses can be no more than that spouse’s earned income. For example, if you have one child and your spouse worked part time and earned $1500 for the year, your qualifying expenses are limited to $1500.
3. If you are in an employer sponsored dependent benefit plan, your qualifying expenses must be reduced by the payments you received from that plan.
Where can I get more information about the child care credit?
While covering most of the main features of the child care credit, this has been a “tip of the iceberg” discussion. For more details, refer to IRS Publication 503 or the instructions for IRS Form 2441 (the form you must file to claim this credit) both of which are available online at www.irs.gov. Or, check with your personal tax advisor. Or, ask me.
How can I get a receipt for my 2011 childcare payments to OakHaven?
Just ask us and we will prepare one for you.