The tax credit that helps cover summer camp
With one in five parents in America spending more than $3000 for summer care (and 12% spending more than $4000), we believe that families should be aware of as many ways as possible to make summer child care more affordable.
In a previous post, we explained how employers could contribute to the summer child-care expenses of their employees, and benefit from a tax credit by doing so -- and make those contributions easily by using Finli.
But even with the help of an employer, it’s more than likely that the majority of the financial burden of summer care will fall on the family.
The burden weighs especially heavy on families where parents are earning the federal minimum wage ($7.25/hr -- although 29 states have minimum wages higher than the federal minimum).
According to a study conducted by New America, for families who spend at least $3000 on summer care, the daily rate of care comes out to about $60 -- $6 more than the $54 a day a full-time minimum wage employee makes.
Thankfully, in addition the tax benefits an employer can earn from directly contributing to an employee’s child-care related expenses, families can also benefit from a tax credit of their own: the Child and Dependent Care Credit.
Earning the Child and Dependent Care Credit on Summer Care
With regards to summer care in particular, families can receive a tax credit worth up to $1,050 for one child or up to $2,100 for two or more children for their summer care expenditures.
In order to secure the credit, the summer care must be a daytime summer camp (no overnight camps) or daycare. Both parents must be working or looking for work while the child is in summer care and the child (or children) must be under the age of 13.
By leveraging a combination of employer contributions and the Child and Dependent Care Credit, we hope that families, especially those that must spend a significant portion of their summer income on child care, can better manage the rising costs of summer.