Day Camp Tax Credit


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    By: ActivityTree

    We all want to keep our kids active during the summer, but did you know the IRS can help you pay for it?  Soccer camp, music camp, fishing camp, day camp expenses of all kinds may be eligible for a tax credit of up to 35% depending upon your income. 

    How Do You Qualify?

    1.    Your child must be under 13 years old during the day camp.
    2.    You, and your spouse if you are married, must be employed, looking for work or attending school (this creates the need for your child to be cared for by another person).
    3.    Your child must be enrolled in a day camp.  Tutoring, summer school and overnight camps do not qualify.
    4.    You must be able to supply the IRS with the provider’s identity.  This generally means including their name, address and tax payer identification number in your tax filing.

    What Can You Claim?

    You can claim a maximum credit of 35% on unreimbursed expenses up to $3,000 for one child, or up to $6,000 for two children.  The amount of credit decreases at higher income levels, but does not completely phase out.  If your Adjusted Gross Income (AGI) is $43,000 per year or higher, you are still eligible for a 20% credit.  For the sake of example, let's assume you are eligible for a 20% credit.  That means if you spend $1,000 on day camp, you will receive a $200 tax credit.  Not bad.  You should be aware that this credit is not in addition to the childcare tax credit.  So, if you are already incurring more than $3,000 in unreimbursed day care expenses and are receiving a tax credit for those expenses, your day camp expenses are not eligible for an additional credit.

    Should You Use Your FSA Instead?

    If your employer offers a child care Flexible Spending Account (FSA), you may want to consider using your FSA instead.  This is particularly true if you are in the 25% tax bracket or higher.  You may deduct up to $5,000 pretaxed from your paycheck and contribute it to your FSA.  That money can be used for day care expenses and result in a savings equal to your tax rate, 25% or more.  So, if you spend $1,000 on day camp and your tax rate is 25%, you just saved $250!  Beware that unused money contributed to an FSA is generally forfeited.  You should also know that you typically have to make your FSA contribution decisions at the time of your annual benefits enrollment.  So, unfortunately, if you are not already contributing enough this year, you may have to wait until next year to take advantage of your FSA contributions for day camp expenses.

    What Else Should You Know?

    As with all tax related issues, there are additional details and rules to be followed.  Consult IRS Publication 503, or your tax advisor for more information about the child care tax credit.

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