Fun in The Sun: Summer Camp Tax Credits

Posting by Brian Wynne, CPA

As we suffer through July’s heat waves, many summer day camps are in full swing, keeping kids occupied while we parents keep our noses to the grindstone.  In addition to convenient child care and stimulating educational experiences, day camps can also be a tax advantage to your family.

In addition to child care costs that are incurred throughout the school year, the IRS allows parents to consider the costs of summer day programs for the Child and Dependent Care tax credit.

You may claim the credit if…

  • You have earned income (meaning income from work);
  • Each eligible child is under the age of 13;
  • You are sending your children to day camp to allow you to work or to find work.  If you are married, both you and your spouse must have full-time employment, be seeking work, or be full-time students;
  • You are sending your child to a day camp – overnight/sleep-away camps do not count toward this tax credit.

Claiming the Child and Dependent Care Tax Credit
The credit is based on up to $3,000 of expenses for one qualifying dependent and $6,000 for two or more ($6,000 is the overall maximum).  The credit itself is a percentage of those expenses.  For taxpayers with adjusted gross income (AGI) exceeding $43,000, the credit is 20% of qualifying expenses.  This results in a credit of up to $600 for one dependent or $1,200 for two or more.  The credit increases when AGI is less than $43,000, all the way up to 35% of your qualifying expenses for incomes below $15,000.

The credit can be applied to out-of-home day cares and summer day camps, as well as a childcare provider that you bring into your home.  Summer schools do not qualify.  When filing, you must identify the caregiver – whether it is an individual or a certified day care or program.

FSA vs. Tax Credit for Summer Camp Expenses
You can also use a Dependent Care Flexible Spending Account (FSA) to cover summer camp expenses.  However, you cannot use both an FSA and the child care tax credit to cover the same expenses – so if you paid for your child’s day camp using your FSA, you cannot also base the credit on those same expenses.  Since $5,000 is the maximum dependent care allowed in your FSA, if you have two or more children and spend more than that amount, you can base the credit off of the remaining $1,000 until you hit the maximum $6,000 of qualifying expenses.  For most people, this would result in a $200 credit (20% of $1,000).

Company-provided child care benefits can also affect the amount you can deduct.  Remember, in order to deduct these expenses, they must come from your taxable income.

If you find yourself moaning and groaning about the costs associated with your family’s summer childcare, with smart tax planning, you may be able to offset some of the costs.  And, as always, we encourage you to consult with an advisor for the best plan for your family’s unique tax situation.

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