Summer is a time when many parents and guardians experience greater childcare needs. With schools being closed for the season, many caretakers choose to send their children to summer camp. And while summer camp can be costly, it sometimes qualifies as an often overlooked tax break.
Tax Credit for Summer Camp
In some cases, parents and guardians can claim the federal child and dependent care credit when they pay for summer camp. To claim the credit, your costs must be considered qualifying childcare expenses.
- Children over 13 do not qualify for the tax credit.
- Overnight camps do not qualify.
- Summer camp must be used as childcare (for example, when stay-at-home parents send children to summer camp, the cost will not qualify).
Note: Tutoring and education programs do not qualify unless below kindergarten level. However, specialty camps do qualify (for example, math camp, computer camp, etc.).
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Child and Dependent Care Credit for 2023
The child and dependent care tax credit is a nonrefundable credit. That means that while it can reduce your federal income tax bill, you can’t receive the credit back as a tax refund.
- Eligible taxpayers can claim up to $3,000 of eligible childcare expenses for one child.
- If you pay for childcare for two or more children, you can claim up to $6,000 of expenses (maximum amount regardless of the number of children).
- Only work-related childcare expenses qualify (so you can work or actively look for work).
The credit is worth up to 35% of the childcare expenses you claim. However, this percentage is gradually reduced to 20%. If your adjusted gross income is more than $43,000, your credit is 20% of your eligible childcare expenses (up to the $3,000 or $6,000 limit).
Can FSA Funds be Used for Summer Camp?
A dependent care flexible spending account (FSA) is a work benefit that allows parents and guardians to pay for eligible childcare expenses with pretax dollars. For 2023, parents and guardians can contribute up to $5,000 (or $2,500 from each spouse if married filing separately) to their dependent care FSAs.
Dependent care FSA funds may be used for summer camp in many cases. Your child must be under 13, and camp costs must be a work-related expense. Additionally, you must claim the child (or children) you’re claiming expenses for as a dependent on your tax return. If you have a dependent care FSA, you can also use the funds for other qualified services.
- Babysitting expenses qualify
- Daycare costs qualify
- Preschool tuition qualifies
- Preschool application fees may qualify
Child and Dependent Care Credit vs FSA
You can use a dependent care FSA and still claim child and dependent care expenses on your federal tax return. However, you can’t use the same expenses for both. For example, if your childcare expenses are $8,000 or more, you can use $5,000 of your FSA funds and use the remaining $3,000 to calculate the child and dependent care credit.
You can take advantage of a dependent care FSA only if it is offered by your employer. But most taxpayers can claim the child and dependent care credit, even if they don’t have an FSA.
Parents and guardians with an FSA may pay less in taxes throughout the year (which can result in higher paychecks). With the child and dependent care credit, parents and guardians must wait until they file their federal tax return to receive the tax break.
