June is the month for graduations and celebrations. It’s when your child officially finishes a segment of his or her schooling. Or maybe not, if you are years away from this point.
In the early years, June is when Summer starts and school lets out. It’s when working parents scramble to coordinate the whereabouts of their child during break so that he or she is not left home alone. Maybe you’ve tried taping into Grandma’s free time, but often that’s a limited time offer.
One option is a Summer day camp program. It can be a good idea with triple benefits:
- Your child is on a schedule that fits with your work schedule,
- Your child is out trying something new, and
- You may get a tax credit.
To know if you qualify under the child and dependent care tax credit rules, see if you can say yes to these statements:
- Your child (the one going to camp) is your dependent and under age 13, and
- You and your spouse both have earned income and you file a joint tax return, or
- You file under the head of household status and you have earned income.*
If these are true, than qualifying Summer camp expenses can be up to $3,000 for one child and $6,000 for two children. Your credit (better than a deduction) is calculated at 35-20% of these expenses, depending on your income.
Note that when it’s time to claim the credit (Form 2441 with your income tax return), your records should include: the name, address and tax id number of the care provider, as well as a receipt showing the dates, amounts paid and to whom care was provided.
And just in case you were wondering, here are some of the ‘You can’t claim that areas’:
- The care provider can’t be your spouse, or your other child and
- The camp can’t be overnight (only day camp costs qualify), and
- You can’t have been reimbursed by your employer for the care, and
- The expense can’t include transportation, food, lodging, or clothing, and
- The expense can’t include forfeited deposits or be for school.*
* Since these are just the highlights, you should visit the IRS website (Publication 503) for additional guidance, or talk to one of the tax professionals at Mason & Rich. Enjoy your Summer.