Midyear tax tip #6: Credit for day camp costs

Nancy loves her two boys. She also loves the day camps they go to when school is out for the summer.

As a working mom, Nancy not only appreciates the programs that keep her preteens occupied during business hours. She also is thankful that the camp costs can save her some tax money when she files her 2010 tax return.

How the kids' summer fun could be a tax break for their folks is #6 in our Midyear Tax Moves series.

Most parents already know they can claim the Child and Dependent Care tax credit for expenses they incur for the care of young Jimmy or Janie.

The beauty of this tax break is that it's a credit. That means it can reduce your tax liability dollar for dollar.

But there are some limits.

There are two key requirements to qualify for this tax break. The child must be younger than 13 and the care must be necessary so the parents can go to or look for work.

When the kids are on summer break from school, a day camp can qualify as a care option. 

Note that the eligible costs are only for camps that run, as the name indicates, during the day. Away-from-home camps don't count here, since it's not necessary for your work purposes that your kid spend 24 hours a day at Camp Sleepover.

Also remember that all your day camp costs won't be recouped on your tax return.

When you calculate your credit, you can count only up to $3,000 in year-round child care expenses for one qualified dependent or up to $6,000 for two or more. Even then, you only get to claim a percentage of the costs, ranging from 20 percent to 35 percent, depending on your income.

But, hey, a bit of tax break is better than none.

So if you send your kids to day camp, be sure to hang onto the facility's information and your payment records. Then add them to your other child care costs when you fill out Form 2441 next filings season.

More midyear tax tips on their way: Thanks, Nancy, for sending in the day camp reminder as part of 2010's Midyear Tax Moves.

If you have a tax move we can make now to help reduce an upcoming 2010 tax bill, we'd love to hear from you. I'll be posting the tips, one each weekday until we run out.

If you're succinct, I'll take your tip via Twitter @taxtweet. Got a bit more to say, post it on the ol' blog's Facebook page.

Related posts:

• Midyear tax tip #1: Welcome summer with energy-related tax breaks
• Midyear tax tip #2: Plan health care account moves
• Midyear tax tip #3: Adjust withholding
• Midyear tax tip #4: Evaluate your estimated tax situation
• Midyear tax tip #5: Pay attention to your portfolio
  
• Rock 'n Roll summer camp
• Tax help for summer camp costs
• Camp for kids, tax breaks for parents

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