May 27, 2010 12:00 am

Summer Programs for Your Children

If you send your child to camp or summer school, can you obtain a tax benefit? It depends on your child’s age and other factors.

For Children under Age 13

If your child is under age 13 and you work, look for work, or go to school full time, you may be able to count the costs of the summer program as a child care expense for which a child and dependent care credit can be claimed. The credit is between 20% and 35% of eligible expenses, depending on your adjusted gross income. Eligible expenses are capped at $3,000 for one child or $6,000 for two or more children.

To be eligible, your child must be no more than 12 years old at the time the care is provided or a child of any age who is physically or mentally incapable of self-care.

The costs of day camp are eligible expenses; the costs of sleepaway (overnight) camp are not.

Note: The qualifying expenses taken into account when figuring the credit must be reduced by the amount of any dependent care benefits provided by your employer that you deduct or exclude from your income.

For Children 13 to College Age

If you send your child to camp, a teen tour, or a learning program, the costs are on you with no tax relief. Your child is too old for the dependent care credit and too young for any education tax relief.

If your child does volunteer work for a nonprofit organization, the child (not you) potentially can deduct out-of-pocket expenses related to the work. For example, if your child is a candy striper for a hospital, the cost of the uniform is a charitable contribution.

For College Age

If you pay tuition and other costs so your child can take college courses, you may be able to get some tax benefit from your payments.

Deduction for tuition and fees. A deduction of up to $4,000 in costs may be deductible, depending on your income level (a deduction of $2,000 applies for those with higher income; no deduction is allowed for high-income taxpayers). Technically, this deduction expired at the end of 2009 but is expected to be extended for 2010.

American opportunity credit. This is a tax credit of up to $2,500 for the first four years of higher education; 40% of the credit is refundable (payable even if it exceeds your tax bill). However, the credit has income limits. The credit phases out for single parents with modified adjusted gross income (MAGI) between $80,000 and $90,000 (joint filers with MAGI between $160,000 and $180,000). As a practical matter, if your child is already a full-time college student, you may already have garnered the top credit. However, for a child just starting college, it may be helpful.

Note: The credit cannot be claimed for prep school expenses because this is not a postsecondary school.

Lifetime learning credit. If your child takes any higher education courses, you may qualify for a tax credit up to $2,000 (this credit is not limited to the first four years of college). The credit phases out for single parents with MAGI between $50,000 and $60,000 (joint filers with MAGI between $100,000 and $120,000).

Housing a Student

Some parents may host an exchange student, often as a way to enable their own child to experience foreign travel. If you have an American or foreign student live in your home, you may qualify for a charitable contribution deduction of up to $50 per month for each full month (15 days or more count as a full month) that the student resides with you. Of course, you must itemize to benefit from this write-off.

To qualify for the deduction, the student must be (1) in the 12th grade or lower in a U.S. school, (2) unrelated to you, and (3) with you under a formal agreement with a qualified organization to provide educational opportunities for the student.

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Tax Glossary

Incentive stock option

Option meeting tax law tests that defers tax on the option transaction until the obtained stock is sold.

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