Do you know if your child’s summer camp is tax deductible?
The short answer is it could provide you with a tax credit, which is more useful than a summer camp tax deduction.
A tax deduction allows you to reduce the income you claim and indirectly lowers your taxes based on your tax bracket. If you take a $1,000 tax deduction and you’re in a 15% tax bracket, that deduction is worth $150 (15% of $1,000).
A tax credit directly reduces your tax liability on a more valuable dollar-for-dollar basis. If you get a $1,000 tax credit, you get to reduce your tax liability by $1,000.
New Tax Credits Can Offset the Costs of Some Day Camps
Whether you want to send junior to a Harry Potter camp, a music camp, a science camp, or sports camp, it will cost you. A recently passed Child and Dependent Care Credit can help you offset those costs.
How Much Tax Credit Can You Take?
The IRS provides this tax credit on a sliding scale. The amount of the credit is reduced as your income increases.
What Costs Apply to this Summer Camp Tax Credit?
You can take this credit for expenses such as registration fees and camp tuition for day camps.
You cannot deduct costs for transportation to or from the day camp, for camp-related clothing, or for other required items.
This credit also applies to expenses you incur for before-and-after school childcare for children up to age 12. In the year a child turns 13, you can take expenses for the part of the year when your child was still 12.
Can You Apply the Credit to Any Summer Camp?
No. You must use the camp as a daycare service to allow you to work. This credit applies to any daytime activity that provides supervised care for a child 12 or younger or an older disabled dependent, incapable of self-care.
Other activities could include paying for a daycare center, a baby sitter, or another care provider, such as a nanny or au pair.
Payments to a babysitter or housekeeper will require preparation of a household W-2 for the provider and the preparation of Schedule H with your 1040 to pay Social Security and Medicare (and maybe Federal and state unemployment depending on how much the household employee was paid.)
If you have a dependent incapable of self-care, you can also deduct expenses related to a nurse, home care provider, or other providers necessary for the disabled dependent.
This credit does not apply to over-night camps (only camps held during the workday). The credit also does not apply to expenses related to schooling or tutoring.
To qualify for this child and dependent tax credit, you must meet the following requirements.
1. You must have earned income for the year. This requirement also includes your spouse (if you are married and file jointly).
2. The credit you take cannot exceed your tax liability.
3. You must file your taxes as a single, head-of-household, married filing jointly, or as a qualifying widow/widower with a qualifying child or disabled dependent. Married filing separately has special rules.
4. The provider cannot be your spouse, the child’s parent, or one of your dependents. Sorry, you cannot pay an older sibling to watch junior and get a tax credit.
5. You must be the named custodial parent or the primary caretaker of your child or dependent.
Documentation You Need to Take the Child Care Credit
To take this credit you will need:
- The camp’s official name, address, and FEIN (Federal tax ID)
- The Federal tax form 2441. Note: you cannot file using Form1040EZ.
- Your child’s name and social security number
- Proof of payment to the camp (for your records)
This can be a complicated tax credit. Please contact us if you have any questions.