Get a Tax Credit for Summer Camp

My son is spending his days at science camp for a few weeks this summer. Does the cost of his camp qualify for the dependent-care tax credit?

It may. You can claim the dependent-care tax credit for the cost of day camp if your children are younger than 13 and you’re sending them to camp so that you can work or look for work (the cost of sleep-away camp doesn’t count). You must have earned income to qualify for this credit and, if you’re married, both you and your spouse must have a job or be a full-time student.

The cost of day care, preschool, before- or after-school care, or a nanny or other babysitter can also count toward the credit.

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The size of the credit depends on the number of children and your income. You can count up to $3,000 in child-care expenses for one child, or up to $6,000 for two or more children. However, the size of the credit gradually decreases as income increases. Families earning less than $15,000 can claim a credit for up to 35% of those expenses; families earning more than $43,000 can claim a credit for up to 20% of the eligible costs.

For example, if you have one child, you pay more than $3,000 for care, and you earn more than $43,000, you can claim a $600 credit. Families who earn more than $43,000 per year and have two children can receive a maximum credit of $1,200. Note that this is a credit, not a deduction, so it lowers your tax bill dollar for dollar.

To claim the credit, you must file Form 2441 with your tax return. You’ll have to report the care provider’s employer-identification number or Social Security number. For more details about which expenses qualify, see IRS Publication 503, Child and Dependent Care Expenses, as well as the instructions for Form 2441. Also see the IRS’s Top Ten FAQs About the Child and Dependent Care Credit.

If you use a flexible spending account at work to pay child-care expenses with pretax money, you can tap that account to pay for qualifying summer-camp costs instead of claiming the credit. See Flexible Spending Account vs. Dependent-Care Credit for more information about which tax break may be more valuable to you.

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.