Summer comes with several challenges to different people. To parents, their main concern is usually how best to juggle between their work and the kids. However, it doesn’t have to be so complex, as the IRS stresses that it remains committed with tax credits that can help ease some of the day-camp expenses for the kids.
Any day-camp costs during the summer and all through the year may qualify for the Child and Dependent Care Tax Credit. However, just like other IRS’s tax credits, there are some basic considerations put in place to guide in the implementation of this credit. Taxpayers must bear in mind these factors to benefit.
The Kids Ages: Not all kids of all ages who attend day-camp qualify for the Child and Dependent Care Tax Credit. The kids have to be below 13 years old to qualify. This might disappoint those parents with older kids, but to the eligible ones, lucky for them.
Childcare Facility: The tax credit has no limitation on the venue for the childcare provider. The IRS understands that there are childcare providers who babysit at home while others run daycare facilities away from their homes. If you take your kid to either of these, you are still eligible for the tax credit.
Amount: The IRS set the maximum reimbursed expenses at $3,000 payable within a year for any eligible taxpayer. For two or more eligible individuals, the amount is set at $6,000. Please note that the credit doesn’t cover all the qualifying expenses. Depending on an individual’s income, it can go up to 35% of all the legitimate expenses in a year.
What Doesn’t Count: There are limitations on activities that qualify as well. The IRS excludes costs suffered in an overnight camp or attendance fee for any summer lessons/schooling. If you plan to have your kids take extra lessons in summer, be prepared to shoulder these expenses with no hopes for deductions.
Please ensure that that you get official receipts for any expenses, you will need them when filing your tax returns. Don’t forget the location of the camp and the Employer Identification Number (EIN). Also of great significance are the dates when the kids attended the camp.
Take a look at the Child and Dependent Care Expenses contained in the IRS Publication 503, which can be downloaded from the IRS website.