Good news for parents who use summer day camp as day care for your kids, the federal government now recognizes summer day camp as such. If you are a parent who uses camp to babysit your kids because you have to work, Uncle Sam is offering summer camp subsidization for as much as 40% off.
If you’re interested in cashing in on the discount, there are two ways in which to do it. The first is the dependent care tax credit and the other is the workplace dependent care flexible spending account. And depending on your financial circumstances, you might even be eligible for both.
To qualify, the adult (or adults if you file taxes jointly) must prove that they have earned income (aka you’re working, the whole reason you’re asking for child car tax breaks). In addition the child must be under the age of 12 at the time of the camp. So if your child turns 13 half way through the summer, then any camp he or she attends afterwards will have to be paid at full price.
If you are lucky enough to have access to a dependent care flexible spending account, it is advised to take advantage of that option first. The account will allow you to transfer up to $5,000 per family into a dependent care FSA. The benefit of using such an account is that the money is transferred pre-tax, so the savings can literally be up to 40% off. The only downside to the account is that you will have to decide in the fall how much money to place in the account for the summer, and if you don’t use the full amount the remainder will be lost.
If you’re a worker who falls into the lower end of the tax brackets, then the dependent care tax credit will most likely be your best option. Those who earn $43,000 or more a year will be eligible for a 20% credit, and the credit can go up to 35% for the lowest income workers. But be warned, if you’re planning on taking advantage of these tax credits though, be prepared to do some paperwork. Make sure to save all camp receipts and request the camps tax identification number ahead of time.
Also know that you can not claim costs of child care performed by a spouse or older child under the age of 19. The same goes for those who have live-in relatives who provide child care. Unfortunately, but these costs are not covered either.
Photo: Photospin
