Tax Benefits of Summer Day Camp!

The New and Revised Tax Benefits of Summer Day Camp!

Summer is officially here and the for some – so are the endless costs of summer Day Camp.  Now that the lockdowns are behind us – typical summer traditions can yield some tax benefits, particularly this summer as credits have increased as a result of the passing of the American Rescue Plan Act. Because summer day camp is comparable to day care, the IRS allows taxpayers to include the costs of day camp when determining the amount of the child and dependent care credit you may claim under IRC section 21.

Here are the qualifications:

• You (and your spouse if filing jointly) must have earned income
• You must be the custodial or guardian
• The dependent care must have been used to allow you to work
• Your child/dependent must be under 13
• Childcare/day camp provider cannot be a parent or spouse
• There are exceptions to the above in the case of divorce and disability (so be sure to check with your tax advisor for details

For 2021, the credits have increased from $3,000 to $8,000 for one child and from $6,000 to $16,000 for two or more children.  The credit percentage applied to the credits have increased as well! From 35% to 50% (until AGI exceeds $125,000).

Limitations:

Of course, there are always caveats.  The first is that since summer is in the middle of the year, the allowable tax credit may have been exhausted by extended day care from the Spring school session.  Other limitations are based on adjusted gross income exceeding $125,000. And just to get a jump on tax season, please do not forget to obtain the day care organizations federal ID number, address and phone number, as they are required for tax reporting. Please be sure to check with your tax advisor on how the above interacts with your particular tax scenario. IRS FAQ’s