The Child and Dependent Care Credit is a tax break designed to help families pay for child care while working or actively seeking employment. The credit can equal up to 35 percent of your annual costs, depending on your income. After-school programs are qualified child care costs you can claim using the credit. The programs must meet strict requirements to qualify as after-school care expenses.
Schools often offer before- and after-school child-care programs to accommodate working parents. Programs typically allow the child to stay at school a few extra hours for a daily or weekly fee. Some of these programs feature a specific activity, such as martial arts or dance. As long as the program is used as an alternative to day care, you can claim the fees.
What Is Not Covered
Recreational extracurricular sports and activities, including cheerleading and football, do not qualify for the credit. Summer school, private school tuition, tutoring programs and overnight camps are also ineligible expenses.
To claim after-school expenses, the child or dependent must be age 13 or younger. You must be the custodial parent. Although divorced parents may alternate claiming children as dependents, this credit is strictly reserved for the custodial parent. All expenses must be incurred so that you could work, look for a job or go to school full-time. If you are married, your spouse must also meet the same work requirements.
Amount of the Credit
The amount of your tax credit is a percentage of your dependent care expenses, based on your adjusted gross income. As the income increases, the amount of the credit decreases. As of the date of publication, the credit is equal to 35 percent of the maximum qualifying expenses. For each $2,000 your adjusted gross income exceeds $15,000, the deduction-allowed percentage decreases by 1 percent. In 2012, families with income of $43,000 or more can claim 20 percent of expenses. The maximum credit is equal to $3,000 per child or up to $6,000 for two or more children.
State Child Care Credits
In addition to the federal tax credit, as of the date of publication, 28 states also offer a state Child and Dependent Care Credit. Arkansas, California, Colorado, Hawaii, Iowa, Louisiana, Maine, Minnesota, Nebraska, New Mexico, New York, Oregon and Vermont offer refundable credits. In these states, parents who do not owe money in taxes can receive the credit as a tax refund.
- Kiplinger: FAQs on the Child-Care Tax Credit
- US News Money: 10 Commonly Forgotten Tax Deductions
- IRS: Topic 602 - Child and Dependent Care Credit
- The Piton Foundation: The Child and Dependent Care Credit
- 1040: Child and Dependent Care Credit
- Tax Policy Center: Expand the Child and Dependent Care Tax Credit