With school back in session, summer may already feel like ages ago (where does the time go!?!). However, we wanted to mention an important tax deduction that is easy to overlook once summer fades into autumn: summer-camp expenses.
As the IRS notes (see reference via this link), summer-camp expenses may help to lower a taxpayer’s ultimate tax liability. However, before rummaging through your pile of receipts to support your child’s camp expenses, there are a few key “caveats” to consider. First of all, summer-camp expenses are treated in a manner consistent with other child-care expenses – as a component of the child and dependent care (“CDC”) credit. This is a non-refundable tax credit equal to a percentage of a taxpayer’s child-care expenses, with such expenses being limited to $3,000 for one child or $6,000 for two or more children. The credit percentage decreases from a maximum of 35% of qualified expenses down to a minimum of 20% as a taxpayer’s adjusted gross income increases. As an example, a taxpayer having AGI of $50,000 with three children and $9,500 of child-care expenses would be entitled to a tax credit of $1,200 based on a maximum of $6,000 of qualifying expenses and a 20% credit percentage. We would note that several qualifiers for the CDC credit exist, with the primary one being that a child must be under age 13 when the care is provided in order for their care expenses to qualify.
Many taxpayers will find that they already hit the maximum of $3,000 / $6,000 of qualifying expenses with just regular day-care costs, before even factoring in summer-camp expenses. In that case, you wouldn’t need to read any further (lucky you!). But, if your regular day-care expenses aren’t enough to hit this maximum amount, your child’s summer-camp expenses may be included as well. To be counted towards the CDC credit, the camp expenses must have been incurred to provide child-care while the taxpayer works or looks for work (this same rule must be met for any child-care expenses to qualify under the CDC credit). The IRS also does not allow overnight camp or summer-school tutoring costs to be treated as qualifying expenses.
In summary, if you paid for your child to attend a day camp this past summer so that you could work – or look for work – you may be in luck! And the best part about the child and dependent care credit is the fact that, unlike many tax benefits, you do not have to itemize deductions in order to take advantage of it; it is a credit which offsets a taxpayer’s tax liability directly. Please feel free to contact us if you have any questions about this or any tax matter – we’ll be happy to help!
This discussion is intended for educational purposes only, and may not be construed as actionable legal or tax advice without a thorough review of a taxpayer’s individual situation.
