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Anne Powelson Anne Powelson
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Day camps and day care

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What do day camps, nannies and preschool have in common? Each one can make you eligible for Child and Dependent Care Tax Credits which may lower both your state and federal taxes.

The Federal Child and Dependent Care Credit is a non-refundable credit. To take advantage of the credit you need to have some tax liability. Maine's Child Care Credit is refundable. However, Maine's Child Care Credit is a percent of the Federal Child and Dependent Care Credit, so without a federal credit, there is no state credit. The credit is figured on up to $3,000 of eligible expenses for one qualifying dependent and up to $6,000 for two or more qualifying dependents. The credit is worth between 20 and 35 percent of the eligible expenses. While the percentage goes down with increasing income, there is no income cap on claiming the credit.

There are seven tests to qualify for the credit:

1. Care must be provided to one or more qualifying people. A qualifying person is generally a dependent under age 13 who lives with you more than half the year. For a child that turns 13 during the year, only care provided before their birthday counts. A spouse or dependent over age 13 but incapable of self care may also be a qualifying person for the credit.

2. You must have earned income. If you are married and file jointly, your spouse must also have earned income, though there are exceptions for student spouses and spouses not capable of self care. If you or your spouse's earned income is less than the eligible expenses listed above, that income will be the limiting factor for calculating any credit.

3. You must pay the care expenses so you can work or look for work. Child care used to enjoy an evening out of the house or so you can volunteer is not eligible for the credit.

4. Care payments cannot be to your dependent, spouse or the parent of your qualifying child.

5. The credit is not available for the filing status 'Married Filing Separate.'

6. You must identify the care provider(s) on your tax return. Generally, you must list either your care provider's social security number or employer identification number (E.I.N.) on form 2441. On your Maine return, to be eligible for the increased Quality Child Care credit, that program number is needed as well.

7. Special rules apply if you receive tax-free Dependent Care benefits. See IRS Publication 503 for more details.

Care that qualifies for the credit includes day camps, day care, nursery school, pre- and after-school programs, and nannies.

Care whichdoes notqualify for the credit are overnight camps, private schools at the kindergarten level or above, summer school and tutoring programs.

When claiming any credit, you should keep good records. So, as you're getting ready to send your child off to soccer camp, art camp or horseback riding camp, be sure to ask for a receipt with the E.I.N. on it.


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