How the Child and Dependent Care Credit can cut summer camp costs in 2025
Many parents might not realize it, but you can get a bit of relief from the high cost of day care bills and summer day camps paid in 2025 when you file your tax return next year.
What is the Child and Dependent Care Credit?
The Child and Dependent Care Credit applies to children who are younger than 13 when the day care is provided. You'd complete Form 2441 to calculate the credit and file the form along with your 1040 federal income tax return. Taxpayers also can review IRS Publication 503 for rules.
"Summer day camp expense can be claimed only if the care was necessary for the taxpayer to do work or to look for work," said Brandon Nishnick, manager for tax practice and ethics for the American Institute of CPAs.
"The primary purpose must be for child care and the camp must be a daytime-only program," he said.
Expenses associated with sending children to an overnight camp would not qualify.
Typically, you're able to recoup only a small portion of your costs. Yet, no one should leave money on the table and ignore the credit if they qualify to claim it.
"In general, to qualify, parents must work or be full-time students and use a day care, summer camp, or another program while they work and the provider must have a Social Security Number or Federal Identification Number that will be needed to apply for the tax credit," said Mark Steber, chief tax officer for Jackson Hewitt Tax Services.
How do you calculate the tax credit for summer camps?
The Child and Dependent Care Credit is calculated as a percentage of your qualifying expenses, which ranges from 20% to 35%, depending on your adjusted gross income, according to Nishnick.
If a taxpayer has a qualifying child under the age of 13, typically they can claim up to $3,000 in eligible care expenses or $6,000 for two or more children.
2026 tax planning: Don't expect a speedy tax refund in 2026 from an understaffed IRS
The maximum credit ends up being up to $1,050 for some taxpayers with one child or dependent. And it can be as high as $2,100 for some taxpayers with two or more children or dependents. Or it can be much less than that.
How much you'd save in taxes would vary based on your income and your expenses. The value of the credit declines as your income goes up.
Consider this example: Take someone who has two children under 13. Say they spend $8,000 in the year for care expenses. Only $6,000 is eligible in this case to be taken into account as an expense for the credit.
If your adjusted gross income is $45,000, you would receive a credit of $1,200, which is 20% of the $6,000 in eligible expenses, Nishnick said.
Again, expenses must be associated with what you'd pay for care during the time you went to work or were looking for work. We're not talking about what you'd pay a sitter on the weekend to go out to a concert.
In order to go to the office or work site, many parents must arrange for care, and paying for the child to attend a day camp program is one such option.
Make sure to keep detailed records now
"As a credit, it is a dollar-for-dollar reduction in tax owed," said Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting in Riverwoods, Illinois.
The credit is a nonrefundable tax credit on 2025 returns that can reduce the amount of income tax you owe. But Luscombe noted there is no credit to the extent that no tax is owed. It won't generate an additional refund if your tax liability for the year is less than the credit amount.
What you want to do now is keep good, detailed records of your child care expenses, including the camp expenses and provider information if related to a summer camp.
The biggest mistake that parents make, some experts said, is failing to keep records of child care during the year, including amounts paid and the address and Taxpayer Identification Number of the summer camp or child care provider.
Nishnick said parents should take time now to ensure that their care provider is eligible if they plan to claim the credit.
"They cannot be your spouse, the child's parent, a dependent, or a relative under the age of 19. The care provider must be properly documented with a name, address and taxpayer ID," Nishnick said.
And don't expect to get any credit for an overnight camp. "For example, if the parent works a third shift or overnight such as in a hospital, these costs for an overnight camp would still not qualify," Nishnick said.
Your child's age at the time the care is provided remains a key factor.
"The care must be for a child who is under the age of 13 at the time the care is provided," Nishnick stressed. "For example, if the child turns 14 the second day of summer camp, then the remainder of those expenses would not qualify."
Unfortunately, Steber said, parents often overlook or forget to claim the Child and Dependent Care Credit. Or some try to claim ineligible expenses toward the credit.
Some parents, of course, have been able to work remotely in previous summers since the COVID-19 pandemic hit in 2020.
Yet, we're continuing to hear about more return-to-office initiatives. Ford Motor, for example, announced in June that the automaker is calling the majority of its salaried workforce back to the office four days a week, effective Sept. 1.
More families could be juggling more child care expenses and might want to brush up on available tax breaks.
The Child and Dependent Card Tax Credit can work whether you itemize deductions or claim the standard deduction.
Make no mistake, the rules as they are right now are complicated.
"The credit is calculated based on your income and a percentage of expenses that you incur for the care of qualifying persons to enable you to go to work, look for work, or attend school," according to the Internal Revenue Service.
Currently, Luscombe noted the credit phases down from 35% of expenses for taxpayers with an adjusted gross income of $15,000 or less to 20% of expenses with up to $43,000 in AGI. It never falls below 20%.
The total expenses that you may use to calculate the credit may not be more than $3,000 for one qualifying individual or $6,000 for two or more qualifying individuals.
If you use a flexible spending account at work, though, you're not going to be able to claim what you spent out of that account.
If you saved $1,000 in a flexible spending account and used that money toward day care or summer day camp expenses, for example, you could calculate the dependent care credit based on up to $2,000 in expenses for one child.
The IRS has an online tool that can help you run some numbers to see whether you qualify to claim the Child and Dependent Care Credit.
Who qualifies? It's not just expenses for children.
"A qualifying person generally is a dependent under the age of 13, a spouse or dependent of any age who is incapable of self-care and who lives with you for more than half of the year," the IRS states online.
Some tax rule changes could be ahead
Going forward, some changes in the child and dependent care credit could be ahead for 2026 expenses.
On July 1, the U.S. Senate narrowly approved tax-and-spending legislation that President Donald Trump calls "One, big, beautiful bill." The package went to the U.S. House, where it passed July 3. It was being sent to Trump to be signed into law.
The Senate reconciliation bill includes a proposal to increase the maximum rate to 50% from 35% of qualifying expenses for lower-income families. Luscombe noted that this change is proposed to be effective starting in 2026.
Garrett Watson, director of policy analysis at the nonpartisan Tax Foundation, said a broader range of households would see a higher credit value for eligible dependent care expenses on their tax return under the Senate version.
The 50% credit rate would phase down for taxpayers with adjusted gross income over $15,000.
For example, the percentage used to calculate the credit could be reduced from the new 50% mark by 1 percentage point, but not below 35%, for each $2,000 that the taxpayer's AGI exceeds $15,000.
The percentage would then be further reduced, but not below 20%, by 1 percentage point for each $2,000 ($4,000 for joint returns) that their AGI exceeds $75,000 ($150,000 for joint returns).
Watson noted that the Senate proposal was scored by the Joint Committee on Taxation, a nonpartisan government agency, as costing about $9.3 billion over 10 years.
Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on X @tompor.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Hill
2 hours ago
- The Hill
Billy Long's IRS ouster follows clashes with Treasury
President Trump's removal of Billy Long as head of the IRS after only two months on the job has cast an uncomfortable spotlight on the agency, which already churned through six different leaders this year. Multiple sources familiar with the matter told The Hill that leadership at the Treasury Department clashed with Long and that there were concerns within the administration that he was not a good fit to lead an agency that prides itself on implementing tax policy without getting caught up in partisan drama. But his exit also means the IRS will have its seventh commissioner of the calendar year, with Treasury Secretary Scott Bessent taking over on an interim basis. 'I think they're going through turbulence right now,' one source familiar with the matter told The Hill. 'People just don't know yet what the future holds.' Long was a controversial choice to lead the IRS, which is a technocratic agency responsible for collecting tax revenue and enforcing the nation's tax laws. A former Republican congressman from Missouri, Long previously worked as an auctioneer and a real estate broker. He drew scrutiny over his promotion of a pandemic-era tax credit that was riddled with fraudulent claims. The former congressman lasted less than two months on the job after being confirmed in June in a party-line Senate vote. Sources told The Hill that there was growing frustration among Treasury officials with IRS leadership since Long's arrival as commissioner. One source familiar with the matter said Long had gone off script and made remarks that required clarifications or cleaning up, something viewed as a particular issue on an issue as sensitive as taxes. One incident in particular was viewed as the final straw when Long last month said at a conference that tax filing season would start in February next year, a change from the typical starting point of January. In a social media post minutes after he announced his departure from the IRS, Long wrote that tax filing season 'will start at the customary time around MLK Day.' 'These folks are pros and know what they are doing,' Long added of top Treasury officials. One source told The Hill that senior Treasury officials felt Long's tenure was 'an impossible situation' that needed to be resolved. The Washington Post reported that there was another reason for Long's shift to an ambassadorship: That the IRS had clashed with the White House over a push to use private tax data to track down undocumented immigrants. 'I think the president wants to see Billy Long as the ambassador to Iceland. As you know, that's where he will be headed,' White House press secretary Karoline Leavitt said in response to a question from The Hill during Tuesday's press briefing. 'And the president loves Billy Long, and he thinks that he can serve the administration well in this position.' A Treasury spokesperson praised Long's 'zeal and enthusiasm to bring a fresh perspective to the Federal Government.' The spokesperson said a new candidate for IRS commissioner will be announced 'at the appropriate time.' Trump is expected to announce his choice to replace Long sooner rather than later. Bessent is already deeply involved in macro-economic issues and has been Trump's point person on trade talks, making it difficult for him to also oversee the IRS even on an interim basis. The next IRS commissioner will also be tasked with overseeing the first tax season since passage of the massive reconciliation bill. The legislation extended the 2017 tax cuts and enacted changes to the State and Local Tax (SALT) deduction, the child tax credit, taxes on tipped wages and taxes on overtime wages and various other smaller alterations. 'You want stability of leadership,' one source told The Hill. 'That creates an atmosphere and environment for the organization to get its job done, to reduce mistakes and to meet its mission.' The change atop the IRS comes at a time when Democrats are sounding alarms about Trump's decision to push out Erika McEntarfer as commissioner of the Bureau of Labor Statistics and replace her with a conservative economist. The move came after the jobs report released in early August showed lower-than-expected hiring in July and major downward revisions to the jobs reports from May and June. While Trump and his allies argued the change would improve transparency and accuracy, critics noted McEntarfer had little to do with what the numbers showed. Economists and lawmakers also expressed concern that it would erode credibility and confidence in government data, hurting businesses and consumers in the process. 'In just a handful of months, Trump and his crew have already gutted taxpayer service, weaponized IRS data against innocent taxpayers and set us up for disaster when next year's filing season comes around,' Sen. Ron Wyden (D-Ore.), ranking member of the Senate Finance Committee, said in a statement. 'This is what Trump does — pick incompetent, unserious people for serious jobs, and sit back as the damage piles up.'
USA Today
2 hours ago
- USA Today
The IRS has had six leaders in 2025. What that means for taxpayers.
Turnover at the top of IRS means fewer IRS agents, fewer audits and questions about implementing the new tax law The IRS is on its seventh commissioner of the year, has lost one-quarter of its staff and is faced with implementing a raft of new regulations. Whether and how this turmoil could affect Americans remains to be seen. But the first impacts are likely to be lower tax collections and a harder time getting answers to tax-related questions, according to a former commissioner and a policy analyst. 'You can be fairly confident of the direction of the impact, that having this level of instability is not good for IRS' core functions and for taxpayer service," said Alex Muresianu, Senior Policy Analyst at the Tax Foundation, a tax policy think tank. 'This level of instability coinciding with the implementation of a new set of tax laws ‒ that is a dangerous mix." The IRS got its seventh leader of the year Aug. 8 when President Donald Trump tapped Treasury Secretary Scott Bessent as its temporary head, after removing Commissioner Billy Long. Trump ousted Long after 53 days on the job, giving him the shortest tenure of any Senate-approved IRS Commissioner. The IRS media office referred USA TODAY to the Treasury Department, which did not return a request for comment Aug. 12. Long, who said he will be nominated as ambassador to Iceland, was the fifth person picked by Trump to lead the agency since regaining the Oval office in 2025, but the only one approved by the Senate. Biden's IRS Commissioner Danny Werfel resigned his five-year position three years early in January, rather than be fired by Trump. New priorities with each new leader Each IRS commissioner sets priorities, moves resources and staff around and problem solves differently, Werfel told USA TODAY. Constant flux over the last 8 months has likely made it difficult for staff to function, he said. The IRS Commissioner's job is to make sure the agency runs well. Werfel compared it to keeping trains on time. "Every time you have a new leader these rules and processes can change," he said. "It just sows confusion." CNN and The Washington Post reported that Long was fired after the IRS clashed with the White House over using tax data to help locate suspected undocumented immigrants. Long, a former Republican Congressman and auctioneer, previously had to walk back plans to start tax season later and eliminate the IRS' free tax filing program. Fewer agents to process returns and answer taxpayer questions The Biden administration added nearly $80 billion in new IRS funding, largely to collect unpaid taxes from the wealthy. That money brought the agency to one of its highest staffing levels just before Trump took office. The new administration almost immediately began mass layoffs and offered early retirements for federal employees, in an effort to downsize the government. A quarter of the IRS staff had left the agency as of mid- July, according to the Treasury Inspector General for Tax Administration. Among the hardest hit positions are people responsible for reviewing and processing federal tax returns, and agents, who conduct individual and business audits. Other fired workers were involved in modernizing IRS technology or helping taxpayers by telephone. Werfel said the staffing cuts will impact customer service unless those people's jobs have been replaced by technology, and he said there is no indication they have been. Contact with the IRS is stressful for most taxpayers, Werfel said. Fewer employees means fewer people answering phones and responding to requests for help, fewer available inperson appointments and longer waits for audit results, he said. "The higher functioning IRS you have, the less stressful this is," he said. "If you're going to engage that bureacracy, you want it to at least work." Fewer audits means less revenue Conducting fewer audits means the country is collecting less revenue, which Werfel said should bother Americans worried about the national debt. "We should want our country to be fiscally responsible," he said. "The more money that we leave on the table that is actually owed to the country, the more that we have to put on the credit card at a high interest rate." For every dollar spent auditing America's highest earners, for example, the IRS reaps more than $4 in recovered tax dollars, research shows. Werfel said there is an estimated $700 billion in taxes that are owed each year but not paid, an amount he said could climb if the risk of an audit drops and there is less pressure to pay. "It creates an incentive for more people to break the rules and that means less revenue," he said. Implementing the GOP tax law The IRS and Treasury Department are rushing to stand up Republicans' new tax law. Lawmakers left it up to the agencies to fill in the details of the policy changes, many of which take effect this tax year, including sorting out specifics of how new breaks for overtime pay, tips and other provisions will work. Muresianu, the tax analyst, said taxpayers often need more clarification from the IRS when new tax laws take effect, and the call volume will likely be higher next year. 'If you have instability at the IRS, management problems at the IRS, and their ability to provide service declines, that is particularly bad if it's coming at a time where there a lot of people looking for clarity,' he said.
NBC News
14 hours ago
- NBC News
These are smart moves for required withdrawals in retirement when you don't need the money
As year-end approaches, some older Americans must soon take required withdrawals from retirement accounts — and there are several options if you don't need the money, experts say. Most retirees must take required minimum distributions, or RMDs, from pretax retirement accounts starting at age 73 or face an IRS penalty. The first deadline is April 1 of the year after turning 73, and Dec. 31 is the due date for future years. But some retirees have 'a lot of guaranteed income' before RMDs, or spend less than they have coming in, according to Judy Brown, a certified financial planner who works at C&H Group in the Washington, D.C. and Baltimore area. In 2024, Social Security was the most common source of retirement income. But 81% of retirees had one or more types of private income, such as pensions, investments, rental income or employment, according to a Federal Reserve report published in May. When retirees have more than they need, there could be decisions about how to spend or reinvest their RMDs, experts say. 'It can definitely impact a lot of people,' and the right choice depends on your financial needs and goals, said Brown, who is also a certified public accountant. Here are some options to consider. Reinvest with exchange-traded funds If you still want long-term growth, you can reinvest RMD proceeds into a brokerage account. But you need to choose assets carefully because the account incurs yearly taxes, experts say. Typically, experts suggest exchange-traded funds, or ETFs, over mutual funds in a brokerage account because the assets are less likely to distribute capital gains or dividends throughout the year. 'It's also easier for tax-loss harvesting,' which involves selling a losing brokerage account asset to offset other portfolio gains, Brown said. Since ETFs trade throughout the day like a stock, you have more control when selling specific assets, she said. 'Skip the tax bill' with a transfer to charity For charitable investors, you could also consider a so-called qualified charitable distribution, or QCD, experts say. Open to retirees age 70½ or older, QCDs are a direct transfer from an individual retirement account to an eligible non-profit organization. For 2025, the limit is $108,000 per investor. Once you're 73 or older, you can use QCDs to satisfy yearly RMDs and the transfer won't increase your adjusted gross income. 'It's the IRS' best-kept secret for retirees,' said CFP Ashton Lawrence at Mariner Wealth Advisors in Greenville, South Carolina. 'Skip the tax bill and help a cause you believe in.' Legacy planning with a 529 contribution If legacy planning is important, you can also consider using RMDs to contribute to a 529 college savings plan for your family, experts say. As of May 2025, more than 30 states offer a state tax credit or deduction for 529 contributions, according to education website Saving for College. In most cases, this requires a deposit to your state's plan. There is not currently a federal income tax break for contributions.'It's not going to be enough to offset all of their state [income] taxes,' said Brown. But you can 'get a benefit going for the grandchildren' while securing a state tax break for yourself, she said.
