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Writing off Junior's summer camp costs


Dear Tax Talk,
Can I deduct payments made for summer camp for my school-age children as child care? -- Joe

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Dear Joe,
A child care credit of generally 20 percent of the amount spent for child care is available to two-earner families and single parents. This tax break for child care costs is a credit, not a deduction. A credit is a reduction of the total tax you pay, whereas a deduction is a reduction to the income you pay tax on.

The credit can be higher than 20 percent at certain lower income levels (under $43,000), but for most taxpayers that can afford child care, the credit is 20 percent of the amount spent for child care services.

The maximum amount of expenditures that qualify in any one year is $3,000 for one child and $6,000 for two or more children. These limits are up from the historical limits of $2,400 and $4,800 used in the past decade or so.

The creditable expenses have to be higher than the wages of the lowest earning spouse. For example, in order to get the 20 percent credit on $6,000 in child care expenses, both spouses would have had to earn at least $6,000. If one spouse only earned $4,000, then the credit would only be 20 percent of $4,000.

Child and dependent care expenses must be work related to qualify for the credit: They must allow you to work or look for work. To be work related, your expenses must be to provide care for a qualifying person. You do not have to choose the least expensive way of providing the care. Expenses are for the care of a qualifying person only if the main purpose is the person's well-being and protection.

The cost of sending your child to an overnight camp is not considered a work-related expense. However, a day camp, where the primary purpose is to allow you to work, presumably would be an eligible child care expense.

-- Posted: Jan. 29, 2004




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