Send Your Kids To Summer Camp and Write It Off

I recently heard from a friend and client who was taking his son to basketball camp. He described himself as "camp poor", but thought it a better alternative to his son sitting around all summer. When I looked up the Roy Williams, University of North Carolina basketball camp his son was going to, I about fell out of my chair. Five day summer camp cost $450, without lodging! After further investigation of the camps here in the Denver area, I found that Camp Melo, sponsored by the Denver Nuggets Carmelo Anthony cost $199; former Denver Nugget, Bill Hanzlik's basketball camp cost $150; and current NBA player, no longer Denver Nugget, Earl Boykin's camp cost $265.

Maybe your child isn't a basketball star, heaven knows I wasn't. There are still plenty of other camps that you may be registering for this summer including other sports, as well as music, science, art, academic, outdoor, recreational and more. If anyone has seen a good tax camp I can send my son to, let me know, I just know he would be thrilled to go.

If my friend sent his son to three or four summer camps this summer at a cost of $200 to $500 a piece, he could spend anywhere from $750 to $2,000 on camps just for the one child. Since he has two boys, he might spend as much as $3,000 or more on camps this summer. Now that is "camp poor"!

Here is a tip for how to cut the costs of summer camps, besides choosing camps sponsored by has been players or lesser run teams. According to the instructions for the dependent and child care credit, "[y]ou can include the cost of a day camp, even if it specializes in a particular activity such as soccer." This means that the cost of summer camp registration may qualify you for the child care tax credit. Remember a "credit" applies dollar for dollar against your tax liability, unlike a deduction that reduces your overall taxable income.

To qualify for the credit, the expense must enable you and your spouse to work, and it must be for the care of your dependent child, who is under the age of 13. If your spouse is a full-time student or disabled, you may still qualify under certain circumstances. If your kids are over 13 years old, stay tuned for my next column when I'll give you a great tip on what to do with them this summer for an even better tax break.

Next, the qualifying expenses can't exceed $3,000 per year per child, or $6,000 per year for two or more. The qualifying expenses also cannot exceed the earned income of the lowest earning of the two spouses. The expenses you claim must also be reduced by the amount of tax free dependent care benefits provided by your employer. Finally, although the camp can certainly be multi-day, it can't be a sleep away camp.

The credit will be computed as a percentage of your qualifying expenses and will range from 20% to 35% depending upon your adjusted gross income. In most cases, plan on a credit equal to 20% of the qualifying expenses.

Be sure to get the name, address, and taxpayer identification number (either the social security number, or the employer identification number) for the camp because you will need it to properly complete your tax return.

If you already participate in a dependent care flexible spending account (FSA) sponsored by your employer, consider submitting the cost of the camp as a reimbursable expense. In some cases, this may actually be more advantageous.

Under a dependent care FSA, you may contribute up to $5,000 on a pre-tax basis. The money is withheld by your employer from your paycheck and placed with a plan administrator in a non-interest bearing account. As you incur dependent care costs, you submit a statement with the plan administrator proving the cost, and then get reimbursed.

In addition to a federal income tax savings, utilizing an employer sponsored flexible spending account will also result in FICA (social security) tax savings, because the amount contributed to the FSA isn't included in wages for FICA purposes. One of the downsides of the FSA is that it is a use it or loose it program. So, if you defer the money for dependent care and don't submit enough qualifying expenses, you lose the unused balance at the end of the year.

If you have more than one child who qualifies for the child care credit, so that the limit on expenses qualifying for the credit is $6,000, you can exclude the full $5,000 under the dependent care FSA and also claim a child care credit for $1,000 of expenses.

In my friend's case, if he and his wife spent $3,000 on camps this summer for his two boys, both under the age of 13, he would qualify for a $600 tax credit ($3,000 x 20%), so long as his wife is working and earns over $3,000.

As a side note, I wondered how Earl Boykins camp could be more expensive then Carmelo Anthony's. I think the difference is due to the time of instruction. Boykins offered 25 hours of instruction, whereas Camp Melo provides only 14, and Hanzlik camp appeared to provide about 15 hours of instruction. On an hourly basis, Camp Melo cost $14.21, Boykins cost $10.60, and Hanzlik $10.00. Don't worry, all is still right in the universe.

This is intended for general interest and not as specific legal or accounting advice for anyone. You should consult your tax advisor to get more information.

Scott Jensen, CPA is a public accountant practicing with Bailey Saetveit & Co, P.C. in Greenwood Village and resides with his family in Parker. He can be reached at 303-799-4100, or sjensen@baileysaetveit.com with comments or questions.