If your household is anything like mine, you’re in full summer camp mode right now… With school out, summer becomes a whirlwind of vacations and summer camp – especially for working parents who depend on summer camp as child care.
Fortunately, expenses associated with summer camp may result in a tax break in the form of the child care credit so long as they are work-related. There are, however, some rules and restrictions (as if you expected any different). Follows are ten tips for sorting out summer camp expenses:
- Overnight camp is fun for the parents but doesn’t qualify for the credit. Yeah, I enjoy a break away from the kids overnight as much as the next girl. But for tax purposes, the cost of sending your child to an overnight camp is not considered a work-related expense for purposes of the credit.
- Chess camp might be okay. Ditto for tennis camp or lacrosse. You get the idea… The cost of sending your child to a day camp may be a qualifying expense, even if the camp specializes in a particular activity. You’re not required to choose the cheapest child care option (not that you have to seek out the most expensive, either, since the credit is limited) so feel free to send your kid to the geekiest, sportiest, most dramatic, most artsy camp you want.
- The forms matter. To claim a credit for child care expenses, you’ll need to attach a federal form 2441 to a federal form 1040 , federal form 1040A, or form 1040NR. You cannot file a federal form 1040EZ or federal form 1040NR-EZ (all forms download as a pdf) and claim the credit.
- Stay at home and unemployed spouses make you ineligible for the credit. I know, I know, this is unpopular. But it is what it is. The child care credit is classified for tax purposes as “work-related.” To qualify, you must pay child and dependent care expenses so that you and (not or) your spouse, if married, can work or look for work. However, if you don’t find a job or if you don’t have any earned income from wages, salaries, tips, other taxable employee compensation or net earnings from self-employment for the year, you may not claim the credit.
- As much as I’d love for you to, you can’t pay for my kids to go to camp and claim the credit. For tax purposes, expenses that you pay for summer camp must be for child considered a “qualifying person.” In most cases, this means your dependent child under the age of 13 (some exceptions apply). It may be appealing to ship off your neighbor’s kids, your best friend’s kids – or those of your favorite tax attorney – for the summer but those expenses won’t count for purposes of the credit.
- Haul out that Social Security card. To claim the credit, you must include your child’s name and Social Security number. I’ll be the first to admit that I haven’t memorized the Social Security numbers for all of my kids but I know where to look for them. You should, too. If you don’t have this information on your return, you may lose the credit.
- Summer camp isn’t the same as setting up a tent in your backyard. You have to make payments to an actual care provider who will be identified on your tax return by name, address and tax ID number. Your summer camp provider cannot be your spouse, your qualifying child’s parent or your dependent; if the provider happens to be your own child, he or she must not be claimed as your dependent and must also be at least 19 years old by the end of the year.
- Ice cream is delicious but may not be a qualifying expense. Qualifying expenses at camp are those that focus on child care and do not usually include the cost of food, clothing, entertainment and other “extras.” However, if you can’t actually separate those costs out – and if they are considered incidental – you may be able to include them.
- Changing your mind is okay but won’t result in a tax break. The dirty little secret about summer camp is that you don’t sign up for summer camp in summer. Many camps start filling up in January, so you have to send in deposits early. I don’t know about you but I’m not that organized… If your schedule changes or if you find a place your child likes better, that’s okay, but any money that you may lose because you’ve put it down as a deposit won’t qualify as a child care expense. Similarly, if you pay in full for camp early, you can’t include the cost as a child care expense until the child care is received.
- Getting there may be half the fun but likely not a qualifying expense. If there are transportation costs associated with summer camp – whether by bus, subway, taxi or car – the costs may qualify as an expense for purposes of the credit if the camp takes the child to or from the place where the child care is provided. However, the costs that you spend on your own transportation to get your child to summer camp will not qualify as an expense for purposes of the credit.
This list is meant to be a quick and dirty reference. This is tax, after all, so other limitations, exceptions and restrictions may apply. If you have specific questions or circumstances that might be a little out of the ordinary, be sure to check with your tax professional for more details.
But assuming you meet the criteria, including summer camp expenses for purposes of the child care credit can be mighty useful come tax time. Credits are dollar for dollar reductions in the amount of tax payable which means that they can make a fairly significant dent in your tax bill.
The non-refundable child care credit can be up to 35% of your qualifying expenses, depending upon your adjusted gross income (AGI). Your total expenses must be reduced by the amount of any dependent care benefits provided by your employer that you exclude from your income.
The maximum credit for the year is $3,000 for one child or $6,000 for two or more children. The $6,000 doesn’t have to be divided up equally for the kids, so if dinosaur camp costs a little more than art camp, you can add up the two as opposed to pro-rating them (yes, there’s such a thing as dinosaur camp and my little boy is thrilled).
Of course, there are still no tax breaks for slip ‘n’ slides, water balloons or lightning bug jars… Kids can be awfully expensive. The payoff, however, is totally worth it. Enjoy your kids – and your summer!Want more taxgirl goodness? Pick your poison: You can receive posts by email, follow me on twitter (@taxgirl) hang out with me on Facebook and check out my YouTube channel.