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Signing up for summer camp: Is it deductible?

The first time I tried to sign my kids up for summer camp, I was surprised to learn that most of the camps that I was interested in were already full. When I complained to friends, I was met with blank stares. It was June. Of course, they were full.

Girls at summer camp

To get the best camps, I was told you have to start planning earlier — like January and February.

Planning for summer camp doesn’t just take time: It also requires a bit of budgeting. Summer camps aren’t cheap. Fortunately, when it comes to federal income taxes, some of the costs of summer camp may qualify for purposes of the child and dependent care credit.

How does it work?

To claim the credit, you must have qualifying expenses. Generally, that means that the expenses must be used for child and dependent care of a qualifying child while you work or look for work. If you don’t have any earned income from wages, salaries, tips, other taxable employee compensation or net earnings from self-employment for the year — and you’re not actively looking for work — you may not claim the credit. Similarly, if you have a spouse, your spouse needs to be working or looking for work.

While you may choose to send all of your children to camp, not all of them may count toward the credit. For income tax purposes, you can generally only claim the credit for your dependent child under the age of 13: Older children do not qualify. There are some narrow exceptions, such as children who might be disabled (ask your tax professional if you think your circumstances might fit an exception).

How much is it?

The amount of the credit is based on a percentage of work-related expenses and can be up to 35 percent of your expenses. Those expenses have to be paid to an actual child care provider who will be identified on your tax return by name, address and tax ID number. Be sure and get the tax ID number in advance if the credit is important to you: I’ve noticed that some summer camps, especially those affiliated with colleges and universities, are refusing to provide a tax ID number. Without that tax ID number, you may not claim the credit.

What about specialty camps?

Specialty camps may still qualify for the credit. That means that sending your daughter to lacrosse camp or your son to acting camp may be OK so long as you meet the other criteria and the main purpose of the camp is to provide child care while you’re working (or looking for work). However, the “extras” — the lacrosse sticks, mouth guards, food and other sundries — don’t count toward legitimate child care expenses.

And you’ve probably guessed as much but the credit applies to day camps only: Overnight camp doesn’t qualify. Since it’s a pretty tenuous argument that you’re working or looking for work for 24 hours a day, it doesn’t qualify as a work-related expense for purposes of the credit.

What are the limits?

All of those dollars add up. And when it comes to cost, we all want to pay a little less. It’s worth noting that there’s nothing in the Tax Code that requires you to choose the least expensive option. You don’t save more, though, by spending more. There’s a cap on the amount of expenses that you can claim to figure the credit: $3,000 for one child or $6,000 for two or more children.

To claim the credit, you’ll need to attach a federal form 2441 to your tax return. The tax return must be a federal form 1040, federal form 1040A or federal form 1040NR. You can’t file an “EZ” return; that means no federal forms 1040EZ or 1040NR-EZ.

Get more information about the child and dependent care credit >>

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The new tax picture in 2013
Claiming dependents on your taxes
Tax consequences of gifts to kids

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