As summer begins and kids are excited to embark on a work-less and activity-filled summer, parents often overlook the tax advantage of summer day camp costs. Typically, parents write off dependent care costs as child day care like babysitters or nurseries, however, supervised programs in the summer that provide child care during the day have the same tax benefits as the aforementioned day care programs. Unfortunately, overnight camps do not count towards this credit.
With every given credit, there are certain rules that taxpayers must adhere to in order to be eligible for the deduction. One is that both parents must be working or looking for work full time. Stay-at-home parents do not qualify for receiving the dependent care credit. However, if you or your spouse works from home and makes money through a business, then you are eligible.
Unfortunately, you can only claim up to $3000 in year-round care expenses for one dependent and $6000 for two or more dependents. This means day camp expenses may be obsolete if you already spent over the allotted amount during the school year. Additionally, the IRS only lets you take a percentage of the costs for child care. So your actual credit would be percentage of the $3000/$6000 or less for the care. The percentage range is from 20% to 35% of your allowable care costs. This means the maximum credit for one child would be $1,050 (35% of $3000).
Finally, teenagers do not count towards the dependent care credit. So any child 13 or over can still qualify to be a dependent but not receive the dependent care credit.
JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.