Summer Camp Tax Breaks Parents Need To Know About ASAP

Summer’s here, and that means so are long days of rest and relaxation…or, more realistically, scrambling to find care for the kids during the workday. Many parents opt for day camps or sleep-away summer camps to provide their children with additional avenues for learning and socialization during the summer months, but those costs add up quickly, leaving parents gaping at staggering bills, higher than even the already exorbitant costs for traditional daycare.

The average cost of day camp in the US is a whopping $180 per day for private camps — school-sponsored camps and camps through community organizations like the YMCA are generally less expensive — and $450 for sleep-away camps.

Those costs vary by state and even by locale within states, so be sure to comparison shop if you’re on the hunt for camp experiences for your children. While those prices may give you sticker shock, keep in mind that camps do offer invaluable and varied experiences for kids, keep them off the couch and away from screens, and provide them the opportunity to learn new skills or hone existing skills that they wouldn’t normally receive in a daycare or even classroom environment.

The good news is, even though there’s a lot of upfront expense associated with day camps, many of those fees can be used toward federal and state tax credits when tax time rolls around. Tax season may seem far away since we only just finished up with taxes, but it’s never too early in the year to start thinking ahead to next April, and it may help you justify the blow of dance camp or karate camp.

Federal Tax Credits For Summer Camp

The Child and Dependent Care Credit is the lesser-known cousin of the Child Tax Credit. It’s not as popular, but the CDCC offers big decreases in your tax bill and can be more valuable than the CTC.

Parents and caregivers can deduct up to 35% of their yearly childcare expenses — which includes day camps, but unfortunately not overnight camps — for up to $2,000 per child. That amount is then deducted from your total tax bill, and the amount you owe the government will decrease. And since up to $1,500 of the credit is refundable, if you don’t owe any taxes, you’ll receive a refund.

But, because taxes are never simple, there are rules for qualifying for the credit:

• If you are married, you must file a joint return. Married couples who file separate returns do not qualify.
• You and your spouse must both have either earned income during the year or have been actively looking for work.
• The credit only applies to children under the age of 17.
• Overnight camps do not qualify.
• The credit decreases by $50 per $1000 earned for married couples earning over $400,000 and single filers making more than $200,000.

And — sadly — the tax credit is useful come tax time but doesn’t do anything to lower upfront costs.

For those, some parents opt for a Dependent Flexible Spending Account, which allows parents and caregivers to use pretax earnings to pay for qualifying dependent-related expenses throughout the year, including daycare, day camps, and afterschool programs. Funds deposited in FSAs are not taxed, lower your taxable income, and provide parents with the peace of mind that they have money stashed away to cover costly camps and summer programs.

Using a combination of the CDCC and the Dependent FSA is a great way for parents to cash in at tax time and be confident that they’ll recoup at least some of their expenses on care over the summer months.

State Tax Credits For Summer Camp

Federal taxes aren’t the only place you can get a tax break for day camp expenses. Some states offer similar dependent care tax credits, while others offer a tax deduction. Residents of the following states and the District of Columbia may qualify for a tax benefit for day camp expenses:

1. Arkansas
2. California
3. Colorado
4. Delaware
5. District of Columbia
6. Georgia
7. Hawaii
8. Idaho*
9. Iowa
10. Kansas
11. Kentucky
12. Louisiana
13. Maine
14. Maryland
15. Massachusetts*
16. Minnesota
17. Montana*
18. Nebraska
19. New Jersey
20. New Mexico
21. New York
22. Ohio
23. Oklahoma
24. Oregon
25. Pennsylvania
26. Rhode Island
27. South Carolina
28. Vermont
29. Virginia*
30. Wisconsin

*Idaho, Massachusetts, Montana, and Virginia offer a tax deduction instead of a credit. (Deductions, per the IRS, “can reduce the amount of your income before you calculate the tax you owe.” Credits, on the other hand, “can reduce the amount of tax you owe or increase your refund.”) The qualifying amount is used to reduce total taxable income.

Do some research if you’re in a state with qualifying tax credit programs, see how much money you can save, and try to console yourself over the cost of camp by remembering that it’s invaluable for kids — and you may recoup some of those costs eventually. Happy Summer!