In a month or so, you may be sending your child to day camp for the summer. If your child is younger than thirteen, there is a very good chance you can benefit from a few tax write-offs.

Up to $3,000 Tax Credit and Maybe More
For 2013, the child-care tax credit is 35% of qualified expenses but limited to $3,000 or up to $6,000 for the care of two or more children under the age of 13. It just so happens that summer day camp is considered a qualified expense, not sleepaway camp. Parents with earnings that approach and surpass $43,000 are limited to a tax credit equivalent to 20% of qualified expenses, up to $3,000. For instance, if summer camp costs $5,000, you could claim a tax credit of $1,000 or 20% of qualified expenses. Even if you earned $1 million, you are eligible for the tax credit granted that your spouse also works, is looking for work or is a full-time student. That’s the big catch, both eligible parents must have earned income (employment income, not investment income), or is seeking employment, or is a full-time student. For those seeking employment, you will need to maintain documentation detailing your efforts to obtain employment.

Consider tapping into your flexible spending accounts
Parents with a flexible spending account (FSA) may opt to allocate funds to child-care expenses as opposed to using out-of-pocket dollars. The FSA allows parents to use pre-tax dollars (before income taxes and Social Security/Medicare expenses are deducted) to pay for child-care expenses. For instance, taxpayers in the 28% tax bracket would avoid paying 28% plus Social Security/Medicare 7.65% or 35.65% in taxes. If you set aside the maximum $5,000 of your FSA for child-care expenses, you would be saving $1,783 in taxes. You would be saving less, or $1,000 (20% of $5,000), if you claimed the child care tax credit and earned income above $43,000. So, it depends on the situation, but, the FSA could be a better option.

Save copies of receipts to claim the tax breaks
Any invoices and receipts you receive from the camp should be kept for tax reporting next April. You will also need the camp’s employer identification number for proper reporting. Don’t be afraid to ask them for this important information.

More questions? Browse answers or ask tax credit questions online.

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