Can Summer Camp Childcare Expenses Provide Tax Relief?

Aside from the enjoyment children receive at summer camp, parents may also benefit on their tax return by providing their children with this experience. Provided that IRS conditions are met, taxpayers can use these expenses toward a child tax credit on their federal return (line 2 of Form 2441).

The IRS sets forth certain conditions for using summer camp expenses as child tax credits. For taxpayers to claim this:

Camp expenses can qualify for the child care tax credit if they are specialized (e.g., camps that specialize in computers or soccer) are general. If the camp provides transportation, expenses for such transportation may also qualify.

Childcare Tax Credits and the IRS, in General

Taxpayers that send children to camp and qualify in accordance with IRS requirements should be aware of the following

A taxpayer—and spouse, if filing jointly—must have earned income from wages or salaries, either from employment or self-employment, to qualify for the child tax credits. Note that a parent who is a full-time student or is physically or mentally unable to care for him- or herself is considered to have earned income for this purpose.

The taxpayer’s filing status must be single, married and filing jointly, head of household, or a qualifying widow(er) with a dependent child to qualify for this tax credit. A “married and filing separately” status will disqualify a taxpayer.

Depending on income, the child care tax credit may be up to 35 percent of childcare-related expense. There is a cap of $3,000 on expenses paid in a year for one child and $6,000 for two or more children.

If a taxpayer’s employer provides childcare benefits, and the taxpayer excludes that benefit from his income, the taxpayer must deduct the amount of employer-provided benefits from other qualifying childcare expenses.

Taxpayers who have children age 12 and under, live with those children for more than half of the year, send them to a day camp, and are working or looking for work are most likely eligible to use summer camp costs towards a child care tax credit on their tax return.

6 Things to Know About Childcare Expenses

Starting a family can create a number of questions about your tax filing situation. Many working families spend a significant portion of their income on childcare expenses and there are many misconceptions about the impact of childcare expenses on taxes. Here's what you need to know about potential tax benefits related to childcare expenses.

1. You may be eligible for pre-tax childcare benefits through your employer
If your employer offers a flexible spending plan, you can arrange to have your employer pay your childcare provider directly through that plan, instead of paying for childcare out of pocket. Both single parents and married couples who file jointly are limited to $5,000 per year for this, but as a pre-tax benefit, this can produce significant tax savings.

2. One of the most common benefits for childcare expenses is a non-refundable credit
The Child and Dependent Care Credit is non-refundable, meaning it can only be used to reduce taxes owed, the proceeds will not generate a refund. This means, you may not be able to easily recapture your childcare expenses using this, if your income is below a certain level and doesn't generate a sizable tax liability. Also, if you take advantage of an employer's childcare benefits, there's no “double-dipping;” you can't claim both the credit and the employer benefits.

3. For both pre-tax benefits and the Child and Dependent Care Credit, there is an age limit, unless your child is permanently and totally disabled
Eligible children must be your dependents and ages 13 or under. The only exception to this is if a child is deemed permanently disabled by a medical professional.

4. The Child and Dependent Care Credit is capped and based on your adjusted gross income
In general, you are limited to claiming up to $3,000 per child, with a maximum of two children ($6,000 total) to compute the tax credit.

5. Eligible childcare expenses incurred with an eligible care provider are mostly so that you (and your spouse, if filing jointly) can work
If you pay a nanny or babysitter who is not a dependent, co-parent, or otherwise related to you so that you can go to work, then you may be able to claim this childcare expense. Paying a babysitter for something other than care while at work, is not an eligible expense.

6. You (and your spouse, if filing jointly) must be working
If one spouse doesn't work, you cannot claim childcare tax benefits. The only exception to this rule is if your spouse is incapacitated or a full-time student.