ARCHIVES
For full-time working parents, daycare and summer camps are required to survive the year. As we all know, these childcare options are expensive and can cost an average of up to $15,000 annually. According to the American Camp Association, over 14 million kids attend day camps and overnight camps every summer. Summer camps usually cost more than daycare during the school year and average up to $300 a week per child—and that isn’t counting the overnight prices. As summertime approaches, all taxpaying parents need to be aware of the credits your childcare bills may qualify you to receive that can save you money in the long run. It is also critical to understand the difference between a credit and a deduction: a credit reduces your taxes by an actual dollar amount instead of just deducting from your taxable income.
Child and Dependent Care Tax Credit. This credit is only available for employed parents that use childcare for the ability to go to work full-time. However, there are a couple of limitations to determine eligibility. For a single child, the total expenses used to calculate the amount of the credit must not exceed $3,000 and $6,000 for two or more children. In addition to this, the primary reason for the childcare must be to provide protection of the child while the parent is at work. The spouse, if married, must also be working or seeking work if they are not disabled. The child must be under 13 years old at the time of the childcare that was provided.
Using the Credit for Summer Camp. While this credit was originally developed for daycare expenses, summer camps during the day are also eligible for the tax credit. Overnight camps are not eligible for the credit because they are not defined as a work-related expense. However, camps that specialize in activities such as sports or art camps are considered eligible as long as both parents are working during the camp.
While childcare over the summer is very costly, it is great to know that the IRS does recognize summer day camps as eligible for a tax credit. Don’t leave yourself with various childcare bills without seeking the tax benefits from them—you deserve the return for all your hard work. To avoid missing out on any credit eligibility, allow SME CPAs to handle your taxes for you.