As summer draws to a close, children and their parents are busy getting ready for a new school year. However, the time off from school may have been more than a time of recreation and relaxation. If you sent your child or other dependent to a camp this summer, you may be able to reduce your tax bill or increase your refund when you file your 2016 tax returns.
This potential tax benefit is possible due to the child and dependent care tax credit. Many people think of this credit only being available for expenses such as daycare or a private nanny. However, the IRS makes clear that expenses for many camps, including certain summer camps, are also eligible for the credit. That said, not all camp expenses are eligible for the credit, and not all parents and guardians are eligible to take the credit. As a result, we’ve outlined the basic rules governing the use of the child and dependent care credit for camp expenses below.
The camp must have been a day camp, not an overnight camp. Per the IRS’s instructions for Form 2441, the form where the child and dependent care credit is calculated, you “can include [in the credit calculation] the cost of a day camp, even if it specializes in a particular activity, such as computers or soccer. But do not include any expenses for sending your child to an overnight camp, summer school, or a tutoring program.” In other words, while a day camp’s expenses, including a specialized day camp’s expenses, are eligible for the credit, no portion of any overnight camp’s expenses are eligible.
Camp expenses for items other than the care of the child, such as food, may or may not be eligible for the credit. Per the Form 2441 instructions, you “You can include [in the credit calculation] amounts paid for items other than the care of your child (such as food) only if the items are incidental to the care of the child and cannot be separated from the total cost.” If food expenses are separately stated by the camp provider, or if they are significant in amount, they cannot be used in calculating the credit.
The camping child must be your tax dependent and must have been age 12 or younger during the camp. Except in the cases of certain disabled children, the child and dependent care credit can only be taken based on expenses paid for children age 12 or younger. If the child was age 13 or older during the camp, the camp expenses are not eligible for the credit.
The child’s time at the camp must have allowed you (and your spouse, if you are married) to have worked or looked for work during the camp, and both you and your spouse must have had earned income during the year. The purpose of the credit is to allow parents to work and have a child cared for at the same time. As a result, if either spouse is simply a stay-at-home parent rather than a wage earner or self-employed, the tax family is not eligible for the credit.
If you are married, you must file jointly with your spouse to claim the credit. Married individuals filing separately from their spouse are not eligible for the credit.
The camp expenses are treated just like any other child care expenses eligible for the credit. As a result, all child care expenses for the year will be added up and subject to the total maximum for eligible expenses - $3,000 for one child or $6,000 for multiple children. The lower of the amount paid or this maximum is then multiplied by some percentage between 20% and 35%. The percentage that applies to you depends upon your adjusted gross income for the year and your filing status.
In order to claim the credit, you’ll need the camp provider to provide you their business name, their Employer Identification Number, and their address. The IRS requires these items to be reported on your return in order for you to claim the child and dependent care credit. These items are often reported on the camp’s invoice or receipt, but if they aren’t, you’ll need to contact the camp provider.
Many states have their own child and dependent care credits that can add a further tax benefit to camp expenses. The credit as discussed so far is solely a federal credit. However, Georgia, for example, allows residents to claim a state child and dependent care credit equal to 30% of the federal credit.
This is merely a basic, general overview of the tax rules and laws governing camp expenses and the child and dependent care credit. If you have questions about your specific situation, you should contact an Atlanta tax accountant, such as Fusion CPA.
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided in this website is not all inclusive and such information should not be relied upon as being all inclusive.