Call me a geek, but I love finding hidden gems in the tax code (ESPECIALLY for La Crosse, WI people looking around for the best tax preparer in the La Crosse, WI area!).
Ok, I’m a geek. And yes, I should get out more.
But it just so happens that my geekery can redound to your benefit, if we can figure out a way to focus it in on YOUR particular situation.
Because I have yet to plumb the depths of my true inner geek. This is just a start, my friend.
La Crosse, WI Tax Preparer Shows How To Write Off Reginaldny’s Soccer Camp
Alright, brace yourself … this could get slightly complicated.
But it’s very do-able — as are MANY things like this in the tax code (which you’d never believe). But I’m going to do my best to cut through the tax jargon, and give you the bottom line.
Here we go.
1) Your child is younger than 13 and
2) He/she wants to go to DAY camp (overnight doesn’t count!)
3) You are both working (and/or “looking for work”)
… Cha- ching.
You then have a choice — you can pay for it using an FSA (Flexible Savings Account) OR it can give you a child care tax CREDIT (better than a deduction).
With both the FSA and the child care credit, other eligible expenses include the cost of day care or preschool, before-school care or after-school care, and a nanny or other babysitter while you work.
The size of the credit depends on your income and the number of children you have who are younger than 13. You can count up to $3,000 in child care expenses for one child or up to $6,000 for two or more children.
BUT, the size of the credit gradually decreases as income increases. Families earning less than $15,000 can claim a credit for up to 35% of those eligible expenses; families earning more than $43,000 can claim a credit for up to 20% of eligible costs.
All told, it’s a good deal which you should be leveraging, if you qualify.
For most people, it’s a better deal to use the money from the FSA than to claim the child care credit (I won’t go into all the geekery right now, as to why).
But if you have two or more children and your child care expenses exceed $5,000 for the year, you can benefit a bit from both accounts. Here’s how…
You can set aside up to $5,000 in pretax money in your FSA for child care costs, then claim the child care credit for up to $1,000 in additional expenses
By the way, just counting $1,000 toward the child care credit could cut your tax bill by at least $200.
And know that this is just the tip of the iceberg. There really are two tax systems in our country–one for those who know this stuff (and use it) and another, much harsher one for those who don’t.