If you are anything like me, school has started and the past 10 weeks of summer have been a whirlwind of day camps, babysitters, vacations and all around mayhem, especially for working parents who depend on summer day camps for child care.
The good news is, the expenses you paid over the summer for child care may result in a tax break if you paid these expenses for work-related purposes. So the big question is, how do I know if they qualify? It is in fact the IRS we are talking about so there’s got to be a catch right? So let’s spend a few minutes sorting out the RULES OF SUMMER!
- The childcare must be for a dependent that is under the age of 13. If your child turns 14 during the summer, don’t worry. You can still claim his/her childcare cost up until his 14th birthday. So if he turns 14 on August 15th, you can still claim his local day camp cost through that date.
- Overnight Camps are not considered a work-related expense. It is fun for the parents but is not eligible for the child care credit.
- Lego Camp is probably okay. Even though a particular camp may specialize in a certain activity such as soccer, tennis or space camp, as long as the expense was for work related purposes you may still be able to claim the expense for the child care credit. You are not required to send you kids to the cheapest camp or only a daycare facility. So feel free to send them to a camp that suites your child’s particular interest.
- The forms you fill out at tax time matter. To claim the credit, you cannot file a 1040 EZ or 1040EZ-NR. You will need to submit for 2441 to a 1040, 1040A, or 1040-NR. It is best to consult a tax professional if you have any questions.
- Stay at home spouses and unemployed spouses make you ineligible. The child care credit is classified for tax purposes as “work related”. You and your spouse (if married) must work or look for work to claim the credit and both must have earned income. If one spouse is laid off and you continue to pay for child care whether it be camp or daycare, you may be able to still claim the credit if the unemployed spouse finds a job and has earned income from wages, salaries, tips, etc. So hold on to those receipts.
- You can still claim the credit if you are self-employed. Have a home based business? Your net earnings from self-employment claimed on Schedule C will determine your eligibility for the credit.
- You must pay for your own child’s summer camp expenses. Unfortunately, Grandma and Grandpa can’t pay for the grandkids to go to soccer camp during the day and you claim the credit.
- Summer camp can’t be held in your own backyard, i.e. swim camp in your pool. You have to make payments to an actual daycare provider who will be identified on your tax return by name, address, and Tax ID number. Your “summer camp provider” cannot be your spouse, your dependent (big sister watching all the younger kids for money), or the qualifying child’s parent (divorced mom is watching child and getting paid from dad). There is one exception, your caregiver can be an older sibling if 1.) The sibling is 19 by the end of the year and 2.) You no longer claim them as a dependent.
- One big question I get is what about the junior high neighbor kid I have been writing checks to all summer long? The answer is you can claim those expenses as long as they are less than $1000 and you must let them know you will have to put their name, address and social security number on your tax return. I would definitely consider contacting a CPA if this is something you plan on doing. You will want to carefully review this option with a professional to make sure you are not liable for federal and state taxes.
- Things happen along the way. Often times, you start signing up for summer camps long before summer is here and things change. Unfortunately, if you pay a deposit or a camp that is never attended, then you can’t claim that as an expense. Same thing goes for a camp you paid in full. You can’t claim that child care expense until you actually attend the camp.
I hope everyone has found this list quick and easy to understand. If you have specific questions or circumstances, it is always best to check with a tax professional. This is in fact the IRS after all. But if you meet the qualifications for the childcare credit, summer day camps are a great way to take this credit.
The maximum credit for one child is $3000 and $6000 for two or more kids. Another great bit of information is the $6000 does not need to be divided up equally, so if one camp cost more than another, it doesn’t matter. So start working on getting those names, addresses and Tax ID numbers before it’s too late.