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Davis Brown Tax Law Blog


Summer Camp Tax Credits - July 15, 2012

The Child and Dependent Care tax credit is available to certain taxpayers who pay someone to watch their child or children under age 13 while the taxpayer works (or looks for work). Some of the requirements include:

  • The taxpayer (and spouse if filing jointly) must have earned income during the year.
  • Expenses were incurred so the taxpayer could work, or the taxpayer was a full time student.  
  • The child for whom the expenses are paid must be under 13. In the year the child turns 13, all expenses up until the 13th birthday still qualify.
  • The tax credit only applies to day camp or similar care, it does not apply to overnight camps or summer school/tutoring. A specialized camp, such as soccer camp, can qualify. 

The maximum amount of expenses is $3,000 for one child, or $6,000 for two or more children, and the amont of the credit ranges from 35% to 20%, with the credit decreasing as adjusted gross income increases. Therefore, the maximum credit is $2,100 (35% of 6,000).  Also note that when you file your taxes, you will need the taxpayer identification number of the caregiver. If the caregiver is an individual, that is his or her social security number. If the caregiver is an organization, you will use the organization's employer identification number (EIN).

 

I will also note that some employers offer a Dependent Care Account which allows employees to set aside up to $5,000 of wages on a pre-tax basis to be used to pay child care expenses. This will be more beneficial to certain taxpayers, depending on income. Consult a financial advisor or tax professional to determine which will be most beneficial to you, or whether you can use both.