Tuesday, July 5, 2016

Summer Camp! What's Tax Deductible?

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My kids did their share of summer camps growing up and like many other parents, my husband & I dealt with guilt and whiny kids. Many are luckier than us, they have a FSA {Flex Spending Account} through their employer to defray some of the hefty costs of day-care. Let's take a look at what summer camp costs are tax-deductible. 

What Are Child Care Costs?

Instructions for Form 2441, defines Qualified Expenses as, "These include amounts paid for household services and care of the qualifying person while you worked or looked for work." So most amounts you pay to a day care or a baby sitter qualifies. Child support payments and expenses that are reimbursed do not qualify. 

Who Can Take Child Care Credit?

 All of the following should apply for you to be able to take the credit:

  1.  Your filing status can be single, head of household, qualifying widower with qualifying child or married filing jointly. If filing as married filing separate, you may be able to take the credit depending on certain conditions. 
  2. The care should be so you (and your spouse if filing jointly) could work or look for work. Or if you were full time students. 
  3. The care should have been provided to qualifying persons. 
  4. The person providing the care should not be your spouse, your dependent, or the parent of your qualifying person. 
  5. You report the information of the care provider on line 1 of the Form 2441. 
The qualified expenses are limited to $6,000 per year. If you have more than one qualifying child, this amount does NOT have to be distributed equally. 

If you have a FSA from your employer, you can still claim the dependent care credit to the extent your expenses are more than the amount that you pay through your Flexible Spending Account. 

The maximum amount of dependent care costs you can fund through an FSA is $5,000.
But the credit applies to as much as $6,000 of expenses for filers with two or more kids
under the age of 13. In that case, you’d run the first $5,000 of dependent care costs
through the FSA, and the next $1,000 would be eligible for the credit on Form 2441.
For most filers in this situation, taking the credit will save an extra $200 in taxes. 


Summer Day Camp costs qualify for the dependent care credit.
If you send your child to any special day camps this summer, such as those for sports,
computers, math or theater, you can take a tax deduction on those expenses. If your kid is attending camps that focus on improving reading or study skills those costs are eligible under this form as well.

Caveat: The costs of summer school and tutoring programs aren’t eligible for the credit.
Neither are overnight camps. The other rules for the tax credit (as stated above) also must be satisfied. The child must be under 13, and expenses must be incurred so the parents can work.

The above list is not exhaustive and there are many more conditions that could preclude you from taking the credit or nuances that would qualify you for the same. Please consult with an Enrolled Agent if any of the above apply to you. 


Bibliography: Form 2441; Pub 503; The Kiplinger Tax Letters. 

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As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website, www.mntaxbiz.com.