The Dog Days of Summer Camp and Other Kid Tax Tidbits
- TaxesParents and teachers, I have some tips this month to help you squeeze the most out of your kiddie budget. Read on for information about child tax credits, the Kiddie Tax, day camp tax deductions, and a write-off for school supplies.
1. Child Tax Credits: as part of our new tax law, child credits are more valuable than before (at least through 2025, when the rules go back to how they were in 2017). Tax credits actually reduce your tax bill dollar-for-dollar, instead of reducing your taxable income!
a. Every dependent kid who is under age 17 at the end of the tax year will get you a tax credit of $2,000.
b. The credit gets phased out if your Modified Adjusted Gross Income is over $400k for married couples or $200k for others.
c. The kid must have lived with you for at least six months of the tax year.
d. The kid has to be a U.S. citizen, national, or “resident alien,” which is a weird way of saying “green-card holder.”
e. And the dependent doesn’t even have to be your child! You can get a $500 credit for other family members you claim as dependents: parents, brothers and sisters, aunts and uncles, and nieces and nephews.
2. Kiddie Tax: you’ll pay Kiddie Tax when you give gifts to kids and grandkids. It applies to young people under the age of 19 or full-time students under the age of 24.
b. Now a kid’s earned income is taxed at regular, individual rates (unless they are legally married and filing jointly, of course). Unearned income is taxed at estate and trust rates, which will quickly hit 37%!
c. So you may want to wait until kids are 24 to give them those appreciated stock shares or other assets.
3. Day Camp is a Tax Credit? Yes, Virginia. You can get a tax credit on camp for dependents who are under age 13. Remember that tax credits reduce your tax bill dollar-for-dollar.
a. Day Camp is a qualified expense under the Child and Dependent Care credit. The maximum credit is $3k for one kid and $5k for two or more. Sorry if you have three or more kids.
b. The credit only applies to day camp, NOT overnight camp.
c. It’s more complicated for the kids of divorced parents, so check with your tax professional if you’re in that situation.
d. There’s no age limit on this credit for kids who aren’t physically or mentally able to take care of themselves.
4. And for all You Teachers Out There: you know all that stuff you buy for the classroom with your own money? Well, now some of that is tax-deductible without having to itemize deductions. You’re welcome.
a. Previously, classroom expenses had to be claimed as an itemized deduction, and all of your deductions had to amount to at least 2% of your Adjusted Gross Income in order to itemize.
b. Now (and through 2025) you do NOT have to itemize deductions in order to claim this deduction. This is called an above-the-line deduction.
c. Elementary and high school teachers, counselors, and principals can deduct up to $250 of these expenses, or $500 if you and your spouse are both in the education field.
d. These expenses can include supplies, computer equipment, computer-related software and services, books, and other stuff you use in your classroom.
Comment below if you have other tax tips for parents or teachers! And see below for other articles you might like. Thank you for reading.
