Tax Breaks

Take a Tax Break for Summer Camp

The cost of day camp for a kid under 13 qualifies for the child-care credit.

I’m picking summer camps for my 9-year-old son, and the cost is higher than I expected. Can I use the child-care tax credit for summer camp costs?

You can take the child-care credit for the cost of day camp (not overnight camp) for children under age 13, as long as both spouses work (or are looking for work). You also qualify if one of the spouses is a full-time student and the other is working.

All kinds of child-care count for this credit -- day camp during the summer or school vacations, and the cost of a nanny, babysitter or day care so you can work. The cost of preschool counts, too. What you pay for school doesn’t count once your child reaches kindergarten, but before-care and after-care costs qualify.

If you (and your spouse, if filing jointly) report earned 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. The smaller your income, the larger the credit. Families earning less than $15,000 can claim a credit for up to 35% of eligible expenses. The size of the credit gradually decreases as income rises, and families earning more than $43,000 can claim a credit for up to 20% of eligible costs (there is no maximum income limit to qualify for the 20%). This translates into a credit of $600 to $1,050 if you have one child, or $1,200 to $2,100 if you have two or more children. Because it’s a credit, not a deduction, it lowers your tax liability dollar for dollar.

If you’re married, you must generally file jointly in order to qualify for the credit. For parents who are divorced or separated, the custodial parent is usually the one who can claim the credit. The income levels for the credit are the same whether you’re married filing jointly, single or head of household.

To claim the credit, file Form 2441 with your tax return and include the care provider’s employer-identification number or Social Security number. When you pay your camp bills this summer, keep copies of the bills and get the camp’s or other care provider’s employer ID number so you’ll have the information on file for your taxes next spring. For more information, see IRS Publication 503, Child and Dependent Care Expenses.

If you have a dependent-care flexible-spending account at work, it could be a better deal to use money from that account rather than taking the child-care credit, especially if you’re in one of the higher tax brackets, because the money in the FSA bypasses federal as well as Social Security taxes (and may bypass state income taxes, too). For example, if you’re in the 25% tax bracket and pay 7.65% in Social Security and Medicare taxes, contributing the maximum $5,000 to your dependent-care FSA would lower your tax bill by $1,633. The rules for qualifying are the same as they are for the child-care credit -- the child must be younger than 13 and must attend day camp (or receive other types of child care) while you work. Both spouses must have a job or be looking for work, or one can be a full-time student.

You can’t use money from the dependent-care FSA and take the child-care credit for the same expenses, but if you have two or more kids and you’ve used $5,000 from your FSA, you can take the tax credit for an extra $1,000 in child-care expenses. That can save an extra $200 on your taxes if you qualify for the 20% credit.

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