Summer Camp Tax Deductions

Summer Camp Tax Deductions: Kid-free and Tax Savings?

What if I told you Uncle Sam gives you a tax break for sending little Louise to soccer camp..? Once your skepticism subsides you’re ready to learn about how summer camps can qualify for the IRS’s Child and Dependent Care Credit. 

How much are we talking?  Up to $3,000 for one child; $6,000 for two or more.  

Now for the tricky parts.  Several things need to qualify for this credit: 1. The program, 2. The child, 3. The parents.  Let’s break it down. 

1.  What Kind of Summer Camp?

The operative word in the Child and Dependent Care Credit is “care”. I think we all know what care is but here are expenses the IRS explicitly says are NOT care: education, food, lodging, clothing, and entertainment (IRS publication 503). 

If you’re like me the big head scratcher on that list is education since most day care programs have some element of education. The IRS says incidental amounts of the above list are okay. Where they draw the line are summer school programs, tutoring, and the like for students in kindergarten and higher; all pre-K programs qualify. Also, overnight camps are disqualified from the credit. Don’t get greedy, folks :) .  

2. Who Are Qualifying Children/Dependents?

Generally, your child must be under 13 and either live with you for more than half the year or you provide more than 50% of their financial support. Expenses for a dependent that is a qualifying relative who is physically or mentally unable to care for themselves also qualify for this tax credit. 

3. And Finally, The Parents

The goal of this credit is to put more money in the pockets of parents that are working or looking for work. There are some pretty clear cut rules to make sure this credit is going to the correct families, but there are a bunch so let’s try to keep it simple for now:

  1. Each parent must have earned income meaning they worked and received wages, salaries, tips, etc. See the IRS’s list of non-earned income (think interest, dividends - income you didn’t “work” for).
  2. If you didn’t have earned income (i.e. didn’t work) but had expenses looking for work than you can claim the credit.
  3. If you didn’t work but were a full time student you’re eligible as well.
  4. If a parent is mentally or physically disabled they are exempt from the earned income requirement.
  5. You must file your taxes as Married Filing Jointly. If you file separately - no tax credit.

 

Happy Summer!

It goes without saying that taxes are complicated and this credit is no different. I haven’t detailed all the rules and in’s-and-out’s. The goal is to arm you with enough information to ask your accountant the right questions come tax time. As always, I recommend you consult a CPA on all tax matters. Disclaimer: I am a CPA and I own an accounting firm here in NYC. For FREE, customized tax tips try my mobile web at Visor Visor!!

 

Written by:  Dave Burton, C.P.A. 

www.daveburton.nyc

Creator of www.VisorVision.co

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Sources:    IRS Publication 503