Can Summer Camp Childcare Expenses Provide Tax Relief?

Summer Camp

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.

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

  • The expenses must have been for a day camp. Sleepaway camps do not qualify.
  • The expenses must have been for a child age 12 or younger
  • The camp must not have been operated by the child's parent or someone that a taxpayer can claim as a dependent.
  • The child lived with the taxpayer claiming the child care tax credit for more than half of the year.
  • The purpose for sending the child to camp must have been so that the taxpayer—and spouse, if married and filing jointly—could work or look for work.

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

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.

Beginning in 2022, as the American Rescue Plan was phased out, the Child Tax Credit was designed to reduce tax liability as a partially refundable tax credit. This allows for up to $2,000 per qualifying child.

There are guidelines for the maximum credit available and they depend on the Adjusted Gross Income (AGI) found on Form 1040. However, households whose income exceeds the amount listed in the 1040 form, may still be qualified for a reduced Child Tax Credit.

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 Tax Credit may reduce your tax liability
In general, it is a partially refundable tax credit that may reduce your taxes by up to $2,000 for each qualifying child.

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.

Q&A: How much money does a child save you on your taxes?

Each dependent adds to your deductions, lowering your overall taxable income.

There are also, credits available for taxpayers with children. The Child Tax Credit is available for taxpayers who have at least one child under the age of 17. For 2021, the credit was up to $3,600 per child under the age of 6 and $3,000 for children between the ages of 6 and 17 because of the American Rescue Plan Act of 2021.

Today the Child tax credit is the same as it was in 2022: $2,000 per child, which phases out when family incomes reach $400,000 or single filers reach $200,000. There's also an Earned Income Credit, which offers a larger refundable credit based how many dependent children you have. Finally, you may qualify for a Child and Dependent Care Tax Credit if you pay for dependent care while you are at work.

The Additional Child Tax Credit is available to those who get less than the full amount of the Child Tax Credit and may actually give you a refund even though you do not owe any tax. In some examples, if your prior year earned income exceeds the present year AGI – you may be eligible to use the prior year to figure out the Additional Child Tax Credit.

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