Let’s Hear It For Camp Winnebucca!
- the camp is essentially providing child care so that you and your spouse can work (or look for work),
- it is a day camp (sleepover camps are considered a luxury), and
- the child is under 13.
You can claim expenses of up to $3,000 for one child or $6,000 for two or more children.
The expense claimed is limited by the lesser of the earned income of the two spouses. For example, if one spouse’s annual income is $5,000, you cannot claim the full $6,000 expense for two children.
The claim is made on line 48 of the 1040. You must include IRS Form 2441: Child and Dependent Care Expenses.
The tax credit received is 20% of the dependent care expense if your Adjusted Gross Income is greater than $43,000. The percentage credit rises if the AGI is lower.
Alternatively, some employers have a dependent care benefit plan which enables you to use pre-tax dollars to pay for summer care. If your tax bracket is higher than 20%, then the pre-tax route is the better bang for the buck. In addition, the dependent care benefit plan allows up to $5,000/year per family, whether it is for one or more children. Also, if you have two (or more) children and your childcare expenses exceed the $5,000 allowed under your employer’s benefit plan, you can claim the remaining $1,000 under the dependent care credit (for a total of the $6,000 allowed expense).
If Uncle Sam doesn’t recognize your marriage, then you might be able to increase your tax savings. For example, if a gay couple has two children, and both parents work, then each parent could claim one child. This enables each parent to file as head-of-household, which is favorable over filing as single. Furthermore, if both employers offer a dependent care benefit plan, then the family could have up to $10,000/year in allowable pre-tax dependent care expenses. That’ll pay for a lot of s’mores.
Photo credit: stock.xchng
By day, Helen engineers new materials to make computer chips cheaper, better, and faster. When the son goes down (pun intended), she writes about personal finance at Affine Financial Services.