Government Assistance Programs
Child and Dependent Care Tax Credit: The IRS allows an income tax credit of up to $6,000 of dependent care expenses if you have two or more dependents (up to $3,000 for one dependent). The amount of the credit is based on your adjusted gross income and applies only to your federal taxes. This applies to qualifying day camp expenses as well. Visit the FSA Feds web site for more information.
A Dependent Care Flexible Spending Account allows parents to be reimbursed on a pre-tax basis for child care or adult dependent care expenses for qualified dependents that are necessary to allow parents to work, look for work, or to attend school full time. Visit the FSA Feds DCFSA web page for more information.
Day Camp Tax Credit: In certain circumstances, day care expenses, including transportation by a care provider, may be considered dependent care services and paid with pre-tax dollars. Click on this Internal Revenue Service link for more information.
See below for some relevant excerpts from this IRS page:
“Section 21 allows a nonrefundable credit for a percentage of expenses for household and dependent care services necessary for gainful employment. For taxable years beginning after December 31, 2004, the credit is available to a taxpayer if there are one or more qualifying individuals with respect to that taxpayer. For those years, a qualifying individual is defined in section 21(b)(1) as the taxpayer’s dependent (as defined in section 152(a)(1)) who has not attained age 13, the taxpayer’s dependent who is physically or mentally incapable of self-care and who has the same principal place of abode as the taxpayer for more than one-half of the taxable year, or the taxpayer’s spouse who is physically or mentally incapable of self-care and who has the same principal place of abode as the taxpayer for more than one-half of the taxable year.”
“4. Employment-Related Expenses
Under section 21(b)(2)(A), expenses are employment-related only if (1) the expenses are primarily for household services or for the care of a qualifying individual, and (2) the taxpayer’s purpose in obtaining the services is to enable the taxpayer to be gainfully employed.”
“Section 21(b)(2)(A) provides that expenses for day camps may be employment-related expenses, if otherwise qualified. The IRS has received many inquiries about whether the cost of a day camp that specializes in a particular activity, such as soccer or computers, may be an employment-related expense. To provide certainty for taxpayers and enhance administrability, the proposed regulations provide that the full amount paid for a day camp or similar program may be for the care of a qualifying individual although the camp specializes in a particular activity.”
“(3) Transportation expenses
Section 1.44A-1(c)(3)(i) provides that expenses for transportation of a qualifying individual between the taxpayer’s household and a place outside the taxpayer’s household where care is provided are not for care. The proposed regulations provide that the cost of transportation (such as transportation to a day camp or to an after-school program not on school premises) furnished by a dependent care provider may be an employment-related expense if all other applicable requirements are satisfied.”