Mid-year tax planning is upon us and that means it is time to start looking at 2023 tax strategies for our clients. One of the most overlooked summertime deductions? Summer camp.
We don’t usually think about it, and neither do our clients when we ask questions like “did you have any daycare expenses?” Summer camp qualified for the child and dependent care credit when it is paid for children under the age of 13 and for the purpose of parents being able to work or look for work.
Stay-at-home parents will not qualify, and neither will overnight camps. But he cost of day camp to allow parents to work is a qualifying expense.
Camps must be used as a day-care type of expense and additionally cannot be an educational or tutoring program. Which means math camp is not a fit.
Eligible childcare expenses will qualify for the child tax credit up to $3000 or $6000 for two children. The credit is increased for families making less than $43,000 a year.
Your clients also can save tax dollars by contributing to eligible work FSAs and then using the funds to pay for summertime care. Summer day camps as well as babysitting expenses, daycare costs and even preschool tuition are qualified FSA expenses. A married couple filing jointly can put up to $5,000 a year into an FSA account tax free to be used later to cover these expenses.
Be careful when tax planning not to double dip. FSA funds cannot also be used for childcare expenses for the child and dependent care credit. In other words, if a family spends $6,000 a year on summer camp for their children, they can cover the first $5,000 with FSA funds and the remaining $1,000 can be used for the credit.
Make sure you ask specifically about summertime care expenses when your clients have children under 13 years of age. Many parents with school age children will say no when asked if they have daycare expenses because they assume you are asking about care for toddler aged children and they may not know that they’re missing the benefit of summer camp.
