Working women and child care ...Tax breaks available to employers, employees

by Maria G. Hoover

SBJ Staff

Most businesses that set up child-care assistance programs or on-site child care are doing so to help their employees, according to Cary Jones, senior manager with Baird, Kurtz & Dobson, certified public accountants. But, he said, companies that help pay their employees' child-care costs also get a break on their taxes.

"Employers can deduct the money they spend on employee child-care needs from their taxes, with the maximum amount being $5,000 per employee. If, for example, a company had paid $5,000 each for 100 employees, then they would be able to deduct $500,000," Jones said. There is no limit on how many employees can participate in assistance programs.

Jones said companies that provide child-care assistance or on-site child care for employees also benefit in terms of retention and recruitment, which may be even more important than the tax breaks.

Jones also said when companies offer child-care assistance, it affects employees' taxes. If companies set up the assistance programs correctly, employees are able to exclude child-care costs of up to $5,000 from their taxable income, he said.

Parents whose employers don't offer child-care assistance may also be able to get a tax break. Carl W. Simpson, tax preparer and public information coordinator for local H & R Block offices, said some parents who pay baby-sitting or child-care center fees can qualify for a dependent-care tax credit.

However, there are some stipulations. "When the parents pay a baby-sitter, it must be for times when both parents are working. If both parents don't have earned income, they won't qualify," he said.

Simpson said there are exceptions, "If one or both parents are students, or if one parent is disabled, they can qualify during the months they are in school or unable to work due to disability."

The dependent-care tax credit, which is nonrefundable, is figured as a percentage of the total amount paid for child care. Simpson said the percentage ranges from 20 percent to 30 percent, depending on the parents' gross income.

"There are limits to the amount the percentage can be," he said. "Parents are allowed to claim only the first $2,400 spent per child on child care. Also, the maximum amount they can claim each year is $4,800," he said.[[In-content Ad]]