The tax implications of summer fun

The dog days of summer are upon us. The sun is shining bright and hot, and if you’ve planned it right, your kids are occupied at camps and pools.

All is perfect. Well, almost. Wouldn’t it be nice to be off work for the summer like the kids are off school? If you’re like many parents, you don’t have this luxury and must figure out what to do with your kids while you’re at work. Let’s think about some options: day care, summer camp, Grandma and Grandpa’s house. While each of these options has different appeals, let’s discuss the tax considerations.

If your kids don’t normally attend day care then maybe summer camps are an appealing way to entertain them during the day. And guess what? Camp expenses are eligible for a tax credit. The money you pay may qualify for a tax credit on next year’s tax return. There are a few key facts that you should know to determine if your camp costs are eligible for the Child and Dependent Care credit, and here they are:

  1. Your child must be under 13 years old on Dec. 31.
  2. Day camp costs may be eligible for the credit. Overnight camps do not qualify.
  3. Summer school and tutoring also do not qualify for the credit.
  4. Parents must be working or looking for work, which is why you are paying for care. (You can’t just use this as an excuse for R&R time away from the kids.)

To keep things simple, the rules for day care are pretty much the same. Every once in a while the tax rules aren’t too complicated, and this is one of those times. Unfortunately, these aren’t all the rules for whether or not you can deduct child care costs, so check out IRS Publication 503 for more information. 

Enjoy your kids when you can as they grow up fast, but if you are planning on paying for child care during the summer, at least there is a tax break for you.

IRS Circular 230 disclosure: To ensure compliance with Treasury Department regulations, we advise you that, unless otherwise expressly indicated, any federal tax advice contained in this communication was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions or (ii) promoting, marketing, or recommending to another party any tax-related matter addressed herein.

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