First Day of Summer (Summer Solstice): Summer Camp Can be Fun and a Tax Savings

The first day of summer ( Summer Solstice) is June 20th, and with it, comes weeks away from the daily grind.  Of course, summer vacation is just a myth for American adults. Many Europeans beg to differ, or so I am told.

Indeed, summer vacation is greeted eagerly by children around the country (but not in my household, where my oldest is routinely distraught in late June by the reality of no school for an extended period). As for parents, they must prepare for challenge number one: keeping their children busy and out of trouble without breaking the bank.

Enter summer camp

Indeed, summer camp remains a ritual of growing up for some families.  Depending on the camp, the expense varies widely.  Fortunately, there is tax help – maybe.

The Child and Dependent Care Tax Credit  – Qualifications and Expense Limits

The Child and Dependent Care Tax Credit can be applied to summer camp expenses, subject to certain restrictions.  Your first consideration is the type of summer camp.  If your child sleeps over at the camp, that camp does not qualify.  In addition, if your child is 13 or older, he or she’s out – only expenses for kids 12 and under qualify for this credit.

Of course, it’s not as though you’ll instantly get tax help even if you decide to send your nine-year-old to day camp. That’s because there is another limit to the credit.  Once the total dollar amount spent on child care exceeds $3,000 per year for one qualifying child (or $6,000 for two or more qualifying children), you reach the maximum expense for which you can apply the credit towards.  This maximum amount includes not only day camp but also any child care expenses (including a nanny) you incur throughout the year.

Calculating the Child and Dependent Care Tax Credit

The calculation of the credit is based on the number of children under 13, your total child care expenses, and your adjusted gross income (AGI).  If you have one child and spend the maximum or more, you can multiply the top dollar amount ($3,000) by a rate based on your AGI which ranges from 20% to 35%.  The 20% rate applies to households whose AGI exceeds $43,000. Your income must be less than $15,000 to benefit from the maximum 35% rate.

If you have one qualifying child and earn $43,000 or more, your maximum credit may be $600 ($3,000 multiplied by 20%). If you have two or more qualifying children and $6,000 or more in expenses, you may receive a credit of $1,200 ($6,000 multiplied by 20%).  Keep in mind a credit reduces your taxes dollar-for-dollar and therefore may be more valuable than a tax deduction.

The Child and Dependent Care Tax Credit won’t make summer camp free, but it just might make it more affordable.  Just remember to use part of the savings for bug spray.

Michael Rubin

Author of the bestseller Beyond Paycheck to Paycheck, and the upcoming The Savings Solution, Michael B. Rubin is a Certified Public Accountant (CPA) and a CERTIFIED FINANCIAL PLANNER professional. In addition to his experience providing sophisticated financial advice to affluent clients, Michael has been a key source of information for over a decade to countless others. He speaks passionately about and provides guidance on virtually all personal financial planning topics. Michael has appeared in various media, including radio and TV stations across the country, plus national media such as CNN Money.com, latimes.com, The Wall Street Journal, SmartMoney.com, Chicago Tribune, Financial Advisor Magazine, and Investment News. Prior to founding Total Candor LLC, Michael worked in the personal financial services practices of two of the former "Big Six" accounting firms. Subsequently working for several years as a new venture executive for Toys "R" Us, Inc., he made sure that he never actually grew up. He holds an undergraduate business degree from the Ross School of Business at the University of Michigan and an MBA from the Kellogg School of Management at Northwestern University. Michael lives in New Hampshire with his wife and children.

Comments (1) Leave your comment

  1. Do expenses qualifies as dependent care besides day camp. what about expenses for weekly gymnastic classes.

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