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Don’t Forget the Tax Deduction For Your Kid’s Summer Camps This Year!

  • July 2019 | by Abbott Pratt & Associates

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    The fireworks just went off, Summer is in full swing, which means your children might be headed off to spend some time at a summer camp. There’s no shock that the cost of camp can be a significant expense but the good news: You might be eligible for a tax break for the cost.

    The value of a credit vs. a tax deduction

    Day camp is an eligible expense under the child and dependent care credit, which is worth 20% to 35% of qualifying expenses, subject to a cap. Note: Sleep-away camp does not qualify.

    For 2019, the maximum expenses allowed for the credit are $3,000 for one qualifying child and $6,000 for two or more. Other expenses eligible for the credit include payments to a daycare center, nanny, or nursery school.

    Keep in mind that tax credits are especially valuable because they reduce your tax liability dollar-for-dollar — $1 of tax credit saves you $1 of taxes. This differs from deductions, which simply reduce the amount of income subject to tax.

    For example, if you’re in the 32% tax bracket, $1 of deduction saves you only $0.32 of taxes. So, it’s important to take maximum advantage of all tax credits available to you.

    Other important factors to consider to qualify for the credit

    1. It must be related to employment. In other words, it must enable you to work — or look for work if you’re unemployed.
    2. It must also be for the care of your child, stepchild, foster child, or other qualifying relative who is under age 13, lives in your home for more than half the year and meets other requirements.

    Credit vs. FSA

    If you participate in an employer-sponsored Flexible Spending Account (FSA), you can’t use expenses paid from or reimbursed by the FSA to claim the credit.

    If your employer offers a child and dependent care FSA, you may wish to consider participating in the FSA instead of taking the credit.

    Proving your eligibility

    On your tax return, you must include the Social Security number of each child who attended the camp or received care. There’s no credit without it. You must also identify the organizations or persons that provided care for your child. So make sure to obtain the name, address and taxpayer identification number of the camp.

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