“Summertime, and the living is easy,” the song says, yet summer is anything but easy for working parents. When schools shut, many families struggle to find childcare to fill the void during the workday. Summer camps are a terrific alternative, but they come at a high cost. According to the American Camp Association, day camps may range in price from $199 per week to $800 or more per week.
The Internal Revenue Service’s Child and Dependent Care Credit is one approach to assist alleviate these expenditures (IRS).”Childcare is costly, and the expense gives many parents pause about whether it’s worthwhile to return to the job,” writes Matt Becker, a financial advisor and publisher of the blogMom and Dad Money, on a TurboTax site. “However, the child and dependent care credit may help parents maintain working without placing too much strain on their finances.” (For further information, see Tax Credits for Families.)
- Summer camp expenditures may be tax deductible in certain circumstances under the child and dependent care credit.
- In a given year, the credit is limited to $3,000 for a single dependent kid and $6,000 for two or more.
- Several limits apply to claiming the credit, including the parents’ job status, the age of the kid, and the camp’s classification as a day camp.
6 Tips to Make Summer Camp Tax Deductible
Families may claim up to 35% of qualified costs, or $3,000 for one kid or dependant and $6,000 for two or more children or dependents. (It should be noted that the expense does not have to be divided evenly among the children.) Of course, there are restrictions that govern what is and is not deductible. Here are six steps to ensure that your child’s (or children’s) summer camp experience is eligible:
1. Both parents must be working or actively looking for work.
Parents or guardians must have “earned income” that is taxed. If you are a stay-at-home dad and your wife works full-time, you are not eligible for the credit. However, there are no income limitations for claiming the credit. When you’re divorced, the custodial parent typically has the authority to claim the daycare tax credit, however certain divorce agreements may manage this differently. Needless to mention, the parent claiming this summer camp credit must be employed or actively seeking employment. Consult your attorney and/or tax preparer to ensure that you are in compliance.
2. Children must be under age 13.
When it comes to utilizing this tax benefit, older children do not qualify.
3. Only day camps count; sleepaway camps are not allowed.
Sending your kid away for a month is not a work-related cost. However, the sort of day camp is unimportant in terms of the credit; sports, arts, music, and back-to-the-land nature programs all qualify.
4. Camping supplies do not qualify.
Sports equipment, paints and charcoal pencils for art camp, or even a lime green camp t-shirt cannot be deducted or credited toward the credit. To qualify, expenses must be work-related. The costs must enable you to work or search for employment, and they must be for the care of a qualified individual.
5. Payments must be made to an institution (i.e. YMCA Tennis Day Camp for Kids).
Keep all receipts and documents of your child’s attendance at the camps. It also doesn’t harm to maintain a duplicate of the payment. When it comes time to file your taxes, you’ll need to submit the summer camp facilities’ address as well as a federal tax identification number (either a Social Security number or an employment identification number).
6. You must file a Form 2441 to claim the credit.
To claim this credit, you or your accountant must attach federal Form 2441 to your Form 1040 or 1040-SR. If you have any queries about the credit, consult your accountant or a tax specialist.
Camp This Summer, Tax Credit Next April
Don’t get too thrilled about filing for the credit this year unless your children attended day camp last summer. You will not be able to file until your kid or children have attended camp. Also, bear in mind that the credit amounts apply to all childcare expenditures for the whole year, not just camp-related activities. If you want to use the credit to help pay for summer day camps and believe you may need it later in the year, try not to use the whole amount.
The Bottom Line
Working parents with school-age children may utilize the Child and Dependent Care Credit to offset the hefty expense of summer programs, but remember to plan ahead of time. The credit may reduce your tax payment in April, but it will not reduce the initial expenditures of day camp. (Also see: The Advantages of a Dependent Care Flexible Spending Account.)
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