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Summer day camp costs, even in coronavirus time, still eligible for a tax credit

It's official. School is out for the summer. And some day camps could soon offer families a break from coronavirus close quarters and a tax break. 

 

For millions of families across the United States, the official end of the school year doesn't really mean much. The kids already have been home for weeks instead of in classrooms because of COVID-19 closures.

But things may be about to change.

Some day camps are starting to open, albeit tentatively and with lots of new rules and limitations.

For some, the option to send the kiddos to another supervised situation is a welcome break for children and parents alike, who've have just about enough 24/7 family togetherness. These parents are fine with the camps' enhanced coronavirus precautions.

Others, however, will decide that no facility will be able to protect their children adequately, at least not yet. The worry about their kids' possible exposure to the coronavirus is not worth the change of self-isolation pace.

Either way, that's fine. No judging. The decision to send your youngster to camp, even an abbreviated version, is a personal one. You've got to do what is best for you and your family's physical and mental health and safety.

But if you are a parent who's found a local day camp and is comfortable with how it will engage and protect your child for a few hours each day, remember that Uncle Sam might help pay some camp costs.

Tax help paying for camp: Day camp costs qualify for the child and dependent care tax credit.

This tax break covers up to $3,000 spent on care for one child or up to $6,000 for the care costs two or more kids.

You also can aggregate the costs if you have multiple children. Say you paid $2,500 in qualified expenses for the care of your son and $3,500 for the care of your daughter. You can use the total of both to reach the $6,000 maximum to claim the credit.

But don't get too excited about this summer child care financial help just yet.

The amounts spent on a camp are not the same as the actual tax break you might reap.

Figuring your actual credit: The actual tax credit you can get is a percent of those costs that is based on your adjusted gross income. So you must do some math to come up with your exact tax credit amount.

The maximum credit amount is maximum of 35 percent of your eligible camp and other child care costs throughout the year.

And that maximum is available only to parental taxpayers who are on the lower end of the earnings scale, specifically $15,000 or less regardless of filing status.

That translates to a maximum tax credit of $1,050 for care of one child or $2,100 for costs related to two or more youngsters. Here's the math:

Care costs for 1 child

Care costs for 2 or more children

$3,000
 x 35% 
$1,050 child care tax credit claim

$6,000
 x 35% 
$2,100 child care tax credit claim

The percentage of costs amount also is phased down as income increases.

Ultimately, taxpayers who make more than $43,000 can claim only 20 percent of their costs, or $600 for care of one child and $1,200 for two or more youngsters.

This year, with many folks losing at least a portion of their income to COVID-19 closures, the $43,000 income limit might not affect as many taxpayers. And some, with reduced earnings, might get a larger-than-usual credit amount.

Credit provides direct tax savings: While $600 or even $2,100 might not seem like a lot, especially if you've also been paying child care costs year-round, it's at least some help.

And if summer day camp is the only child care cost you incur, then it could help a lot.

Photography-of-people-on-grass-field-1008357_Anny-Patterson_Pexels
Any day camps these girls attend this summer likely will be much different due to the coronavirus, but the costs still could provide their parents with a tax credit. (Photo by Anny Patterson via Pexels)

Plus, the amount is a tax credit. That's a dollar-for-dollar reduction in what you owe Uncle Sam.

It's not an unlimited tax break, though. While the child care credit amount directly reduces any tax you might owe when you file your return, it's a nonrefundable credit.

That means, for example, if you get a $2,100 child care credit and owe $1,800 at tax time, you can only zero out your tax bill. The excess $300 cannot be sent to you as a refund.

Other child care credit rules: In addition to the earnings limits, keep in mind the other child care credit rules.

Day camp costs only are allowed. You can't count the usually higher expenses of sleep-away camps.

This summer of continued COVID-19 flare-ups, overnight camps are not likely to be a consideration. Most of these operations have decided that their costs of keeping kiddos safe 24 hours a day for weeks at a time would be more than the expected limited attendance they would attract.

Your kid, either at summer day camp or after-school care when classes are in session, must be 12 years old or younger.

The kiddo also must be your dependent.

Finally, for parents to claim the credit, mom and dad must work or be looking for a job. If you're married, that means both of you have to be employed or seeking work. The only exception is when one spouse is either a full-time student or is physically or mentally incapable of self-care.

If you're still working from home because your employer hasn't fully re-opened, that counts.

But if you don't have a job other than being a parent and just want a break from COVID-19's continual close quarters, sorry. You can still send them to day camp, but Uncle Sam isn't going to help you cover the cost.

Note, too, that if you have a child-care flexible spending account (FSA) as a workplace benefit, and use those funds to pay for day camp, you cannot then use camp costs to claim the child care credit. The Internal Revenue Service doesn't allow such double dipping.

If you do find a camp where you're confident your child will be well and safely cared-for and qualify for the child and dependent care tax credit, hang on to those receipts. They'll help you file next tax season Form 2441, Child and Dependent Care Expenses.

That's an excerpt of Form 2441 below, which is this week's featured, albeit belatedly, Tax Form Tuesday document.

Form 2441 child and dependent care tax credit claim form
Hey, I don't have any kids underfoot, but this coronavirus quarantine has me losing track of days, too. So just like there's no judging on your kids' camp decision, please no finger pointing at me for being a day late with this feature.

Finally, while this tax form/tax credit blog post focuses on help recouping some child care costs, specifically for day camps, that's just one part of the tax credit and Form 2441.

The tax break's official name, as shown on the form snippet above, is for claiming Child and Dependent Care Expenses. That means it's available for more than just kiddie care costs. You also can claim care costs of other, older individuals who are your tax dependents and who need full-time care while you work.

Day camp guidelines: If you're still looking for a possible place to send your child(ren) for a few weekday hours this summer, start with your state's and, if applicable, city and/or county rules regarding camp openings and operations. Health and elected officials nationwide continue to evaluate their particular coronavirus situations and issue updated guidance.

Like most public gatherings, when camps open, they will be subject to limits on how many may attend and what activities, under certain restrictions, will be allowed. The camp openings also are likely to be part of an overall phasing in of such events, meaning some might not open until July. Again, check with your state's et al rules.

The Centers for Disease Control and Prevention (CDC) also has an online section discussing ways in which camp administrators can help protect campers, staff, and communities, and prevent the spread of COVID-19. C

Finally, while everyone would like a change of pace and scenery, consider camps that have reinvented themselves with virtual experiences.

Interests that already tend to the technological — for example, audio/visual activities or sharpening science, technology, engineering and math (STEM) skills — obviously are more easily converted to virtual experiences, but other camps also are adapting.

Wherever you send your sons and daughters for a few hours of summer break this year, here's to a fun, healthy and possibly tax-saving experience for you all!

You also might find these items of interest:

 

Coronavirus Caveat & More Information
In 2020, we're all dealing with extraordinary circumstances,
both in our daily lives and when it comes to our taxes.
The COVID-19 pandemic and efforts to reduce its transmission
and protect ourselves and our families means that,
for the most part, we're focusing on just getting through these trying days.

But life as we knew it before the coronavirus will return,
along with our mundane tax matters.
Here's hoping that happens soon!
In the meantime, you can find more on the virus and its effects on our taxes
by clicking Coronavirus (COVID-19) and Taxes.

 

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