During April, most Americans in the workforce suddenly find themselves dealing with excess stress as they navigate yet another challenging tax season. Indeed, tax season can, understandably, lead to increased anxiety, however, it also tends to get people thinking about how they can improve their financial circumstances through tax returns, savings, breaks, and more. Nevertheless, once those final tax documents are sent off, a lot of Americans tend to go on autopilot, putting thoughts of taxes and bookkeeping temporarily out of sight and out of mind. Alternatively, many tax professionals who offer tax services Charlotte NC will recommend keeping an eye out for ways to bolster your savings year-round. The more time that you spend discovering ways to unlock tax savings throughout the entire year, the more likely you are to have an easier, and more lucrative, tax season come April. You also won’t miss out on great saving opportunities, a lot of which are time-sensitive.
If you’re currently looking for ways to increase your tax savings, and you also happen to be looking for summertime childcare services, why not combine the two? While summer means a whole lot of fun for children, as a parent, it can be stressful (and expensive!) trying to find childcare that is adequate but won’t break the bank. Fortunately, care credit is an effective and easy way to garner some decent tax savings, that are sure to benefit you and your wallet. In this post, we’ll be discussing the basics of Child and Dependent Care Credit and how it aims to increase your tax savings.
What is Child and Dependent Care Credit? The Basics:
Child and Dependent Care Credit is a tax credit that may help you pay for the care of your children or those you claim as dependents. Like most tax-related savings, you will need to meet the necessary requirements for eligibility. In the case of Child and Dependent Care Credit, this includes your income and a percentage of expenses that you incur for the care of qualifying persons to enable you to go to work, look for work, or attend school. To better understand Care Credit, the IRS has published an online PDF handbook that outlines what it is, and how it works, and even provides an easy flow chart for you to quickly determine whether or not you qualify. You can access the specific section of the handbook here.
Even though the IRS has provided lots of useful information about Child and Dependent Care Credit on their website, between their lengthy writeups and occasional exceptions to the rule, it can be difficult trying to determine whether or not you qualify for these particular savings. This is where guidance from a professional financial team like ours at McGrant Tax & Bookkeeping, a business consulting Charlotte NC can be highly beneficial because it’s easy to miss important details with so much information to look through. We’ve helped many in Charlotte, North Carolina increase their financial capital and maximize their returns and savings by looking for relevant credits and refunds. Nevertheless, it’s at least worth looking into the Child and Dependent Care Credit if you have children. Especially during this time of year when many children are involved in childcare services.
Understanding Summer Camp and the Child and Dependent Care Credit
Understandably, summer camp typically isn’t the first thing that comes to mind when people think of childcare services. Perhaps this is because summer camp is often considered elective, rather than somewhere a kid goes because they don’t have anyone to watch them during the summer. However, as far as the IRS is concerned, summer camp does qualify, and is considered a legitimate form of childcare. Thanks to the Child and Dependent Care Credit, you and your children can both enjoy the benefits of summer camp.
Generally speaking, the stipulations and qualifications surrounding one’s ability to claim credit stay the same from year to year (with some minor tweaks here and there). However, always double-check before dismissing a certain credit or savings opportunity as the requirements can change yearly. For instance, back in 2021, that year’s American Rescue Plan Act made the credit substantially more generous for those who received it. So ultimately, whether it’s the Child and Dependent Care Credit that you’re contemplating claiming, or another type of tax-related savings opportunity, make sure you either properly do your homework, or enlist the help of a professional whose job it is to stay on top of changes in the fine print, whether small or large.
Assessing Your Eligibility and Mapping Your Potential Savings
Although a lot of the data available surrounding taxes and credits might seem straightforward enough to easily understand, there are still variables to consider that differ from person to person. Therefore, even if you determine that you qualify, it’s hard to say definitively just how much money you’ll actually receive. For example, those who qualified for 2022’s credit had to have paid a daycare center, babysitter, summer camp, or another relevant provider to care for a qualifying child under the age of 13 or a disabled dependent of any age. Those who were deemed eligible could potentially qualify for a tax credit on their 2022 taxes of up to 35% of:
- up to $3,000 of qualifying expenses (for a maximum credit of $1,050) for one child or dependent, or
- up to $6,000 of qualifying (for a maximum credit of $2,100) for two or more children or dependents.
As previously mentioned, even though the name of the credit directly references children and dependents, if you pay for care that benefits a dependent who is considered disabled, this credit can also be awarded, regardless of the disabled dependent’s age. Certain exceptions like this are important to remember, as they often allow for eligibility for those who would otherwise not qualify. While most who qualify for the credit must have received earned income, there are some circumstances where that can be waived. Moreover, credit can also be claimed in certain instances where the tax-filing parents are divorced or separated, and the petitioning parent is not the full-time custody holder of the children. Bottom line? Even if you’re certain you don’t qualify, it’s still always a good idea to double-check or ask a professional to verify your status. In any case, savings of any kind are always helpful, regardless of size.
At McGrant Tax And Bookkeeping, we are here to help answer all your questions as your primary bookkeeper in Charlotte NC. Visit our other business location for trustworthy bookkeeping Charlotte NCservices. Please feel free to contact us today at any of our two locations or visit our website https://mcgranttax.com and book an online or physical appointment.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. McGrant Tax and Bookkeeping assumes no liability for actions taken in reliance upon the information contained herein.
