Don't Mess With Taxes

A couple of weeks ago on my neighborhood walk I found myself wondering if every parent in my suburban community home schooled their kids … and if they were all at early recess! Then I realized that Austin area schools were out for the summer.

On today's walk there was nary a child-related sound. Then I realized that school's been out for a while and kids, and their frazzled parents, have discovered day camps.

When I was a kid, we didn't have day camps. Of course, that was a while back and I grew up in a small West Texas town. The closest thing we had was vacation bible school, my fondest memory of which is snickerdoodles.

Nowadays, though, the list of day camps is astounding.

There are arts and crafts camps, music camps, outdoor adventure camps, TV-themed camps, martial arts camps, dance camps, math and science camps, chess camps, cheerleader camps, culinary camps (more cookie baking tips, anyone?). The choices go on and on.

Heck, I'm thinking of trying to get into the stunt camp featured in the video below!

If you can't find the type of camp your kids want, consider starting it yourself. It will probably fill up on the first day of enrollment.

Parental peace of mind and a tax break: Day camps are great for kids. They keep busy, learn new things and there's no overnight camp separation anxiety.

They're great for parents, too. The kids are supervised, the camps are typically less expensive than their sleep-away counterparts and there's no overnight camp separation anxiety.

Plus, as this week's Weekly Tax Tip notes, the cost of day camp counts toward claiming the child and dependent care credit.

Just remember, the rules for claiming this credit are the same in the summer as they are when the kids are in class.

Work required: First, in most situations you (and if you're married, your spouse with whom you file a joint tax return) must work or be looking for work.

If you're a stay-at-home parent, Uncle Sam will not help you pay for a few hours of alone time regardless of how desperately you might need it as the summer drags on.

What if you work from home? That counts as long as you make money. If you don't report any income from your home-based business, the IRS will disqualify you from claiming the child care credit. Sorry.

However, if you or your spouse don't have jobs because you're disabled or a full-time student, the child care costs can be counted based on your partner's work.

Care cost limits: Speaking of those costs, there are limits. And most parents will tell you, the IRS, Congress and anyone else who will listen that the child care expense limits are way too low.

You can count only up to $3,000 in year-round care expenses for one qualified dependent or up to $6,000 for two or more kiddos. That's for all of your annual costs, both the day camp fees and what you pay for child care the rest of the year.

Even then, you don't get to use all of your child care costs to get the credit. You can claim only a percentage of the total. The actual credit ranges from 20 percent to 35 percent of care expenses, depending on your income.

But, hey, some tax relief is better than none. And at least it's a tax credit, which offers a dollar-for-dollar savings on your tax bill.

Qualifying kids: Finally, teenagers kids don't count. I know, I know. Thirteen is not old enough, even in these times when kids mature much sooner, for a kid to be unsupervised.

The IRS probably won't argue with you about that parental care assessment. But neither will it allow you to claim the costs of day camp or any other care for your older children.

You can only count the costs for care of a dependent child age 12 or younger.

But even if your kids are too old to net you a tax break for their camp costs, all of y'all will probably benefit from the programs.

Your best bet is to talk with other parents, as well as your child's school for recommendations. Your local Chamber of Commerce and parks department also might have some day camp suggestions.

If you want a few more ideas, check out Summer-DayCamps.com for a daytime-only, tax credit eligible camp.

You also might find these items of interest:

• Tax credit for day camp costs
• Camp for kids, tax break for parents
• IRS formalizes child care regs