Question on taxes as a med student

[megaFox]

Hi,
Long time lurker here. I am starting med school this Fall. I am married with children. My husband will keep working. My Q is - is there any way I can claim the childcare expenses when I do the taxes for 2010? I keep hearing there is someway to do this if both spouses are employed. Just wondering.
Thanks!

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[NontradICUdoc]

The main thing that is going to change when you do your taxes are:

1) Your income will be reduced
2) you will fill out the information regarding being a full time student.

If you paid for childcare, then that is reportable as a deduction in your taxes. That does not change. I even found out that sending my kids to camp was even deductible because it counted as child care.

You just need to ensure that you keep good records of your scholarships. Some may be taxable. Your institution may send you a 1099 or something like it.

 

[nontrdgsbuiucmd]

Hi,
Long time lurker here. I am starting med school this Fall. I am married with children. My husband will keep working. My Q is - is there any way I can claim the childcare expenses when I do the taxes for 2010? I keep hearing there is someway to do this if both spouses are employed. Just wondering.
Thanks!

Yes if you're working, you can deduct childcare expenses incurred for childcare during working hours (i.e. Friday night sitter is not supposed to be deducted unless you're working then), but not child academic expenses (i.e. kindergarten or beyond). There is a max that can be claimed of around 3K or so per year, check the 1040 for exact amounts. Go to IRS.GOV and do a search on "publications" and "childcare" & you should see more details. I believe you qualify as a fulltime student but haven't seen this myself..

may want to look into if spouse has a flex spending account through work; for example at my company I can put up to 5K per year into an account to pay for childcare expenses; these funds can be used and there are no social security, or federal, or state taxes due. This is way cool in that even social security (@ 6.25% or so) tax is not due on this amount

 

[edmadison]

I even found out that sending my kids to camp was even deductible because it counted as child care.

Be careful with this one (Per IRS publication 503):

"Camp. The cost of sending your child to an overnight camp is not considered a work-related expense.

The cost of sending your child to a day camp may be a work-related expense, even if the camp specializes in a particular activity, such as computers or soccer."

In any even, the real trouble with the child care tax deduction is that many many people are essentially paying babysitters or small day care providers under the table (e.g. no withholding or Social Security). To claim the tax credit, you are required to use your providers taxpayer ID number or SSN. That can be tricky because many providers are not declaring their income nor do they want to pay 15% social security tax.

IRS publication 503 is actually pretty clear about this stuff. I'd give it a read.

Ed

 

[megaFox]

Thanks for the kind responses. I will check out the IRS pub. Next year's taxes should be interesting.

 

[flip26]

Thanks for the kind responses. I will check out the IRS pub. Next year's taxes should be interesting.

I highly recommend Turbotax...the program will walk you through all of these situations.

Trying to understand the tax code by reading the IRS pubs is really time consuming and not always very clear.

Either use turbotax, or hire an accountant - doesn't have to be a CPA - a more economical choice is an "enrolled agent" who is fully qualified to do your taxes, and costs less than a CPA.

 

[megaFox]

I will be using the Montessori School. So, I probably won't have any problem getting their ID and SSN stuff. I will probably let my relative do the taxes (he is a CPA) next year but just curious to know if it's a either or thing. I mean, if my husband puts money away into a non-taxable account, we can not claim the child care tax credits, right? Forgive my ignorance here. I am reading the 503 as I write this.

 

[NontradICUdoc]

Be careful with this one (Per IRS publication 503):

"Camp. The cost of sending your child to an overnight camp is not considered a work-related expense.

The cost of sending your child to a day camp may be a work-related expense, even if the camp specializes in a particular activity, such as computers or soccer."

In any even, the real trouble with the child care tax deduction is that many many people are essentially paying babysitters or small day care providers under the table (e.g. no withholding or Social Security). To claim the tax credit, you are required to use your providers taxpayer ID number or SSN. That can be tricky because many providers are not declaring their income nor do they want to pay 15% social security tax.

IRS publication 503 is actually pretty clear about this stuff. I'd give it a read.

Ed

I know. I looked into it. And since my kids' sitter is under the books, I could not claim her. However, their daycamp was totally deductible and they even gave their tax ID number on their brochure.

 

[Sol Rosenberg]

I will be using the Montessori School. So, I probably won't have any problem getting their ID and SSN stuff. I will probably let my relative do the taxes (he is a CPA) next year but just curious to know if it's a either or thing. I mean, if my husband puts money away into a non-taxable account, we can not claim the child care tax credits, right? Forgive my ignorance here. I am reading the 503 as I write this.

Wrong. You can do both.

 

[nlax30]

My wife works and of course I'm a full time student and it was really straight forward with Turbotax, even for someone like me with not much interest/knowledge in financial stuff and taxes. We don't have any kids yet though, and usually just take standard deduction so ours is pretty simple. You'll probably qualify for one of the education credits though and that has helped quite a bit the past couple years.

 

[Law2Doc]

I know. I looked into it. And since my kids' sitter is under the books, I could not claim her. However, their daycamp was totally deductible and they even gave their tax ID number on their brochure.

It's generally not a wise idea to admit to a crime on the internet. Things are never as anonymous as you'd like to think.

 

[nontrdgsbuiucmd]

Wrong. You can do both.

in my flex spending account wording, it says that I can't deduct childcare expenses if I've paid for them through a flex spending account -- this is because income that flows into a flex spending account is not taxed in the first place, so deducting it from taxable income would be double-deducting the same expense.

 

[45408]

Don't forget you can get a $2000 tax credit for higher education expenses (lifetime learning credit).

 

[NontradICUdoc]

It's generally not a wise idea to admit to a crime on the internet. Things are never as anonymous as you'd like to think.

But if she is not my employee but rather I, and many other people are paying for her services, is this a crime?

 

[Sol Rosenberg]

in my flex spending account wording, it says that I can't deduct childcare expenses if I've paid for them through a flex spending account -- this is because income that flows into a flex spending account is not taxed in the first place, so deducting it from taxable income would be double-deducting the same expense.

OK, I should have been more clear. It seemed like the person who originally asked this was saying that you couldn't get a childcare credit AND have a flexible spending account. As you know, I'm sure, the yearly maximum for a childcare flexible spending account is $5000. It's true that you can't double-deduct if your total childcare expenses are <= $5000, but if they are higher than that, you can claim both (think of it as your childcare expenses are offset by the flexible spending account contribution. Whatever is left can be deducted, etc.) This is consistent with what you posted above, as well.

 

[megaFox]

Great! This is what I was looking for! My childcare expenses will be >5K. So, I will claim both.
Thx!

OK, I should have been more clear. It seemed like the person who originally asked this was saying that you couldn't get a childcare credit AND have a flexible spending account. As you know, I'm sure, the yearly maximum for a childcare flexible spending account is $5000. It's true that you can't double-deduct if your total childcare expenses are <= $5000, but if they are higher than that, you can claim both (think of it as your childcare expenses are offset by the flexible spending account contribution. Whatever is left can be deducted, etc.) This is consistent with what you posted above, as well.