DEDUCT Summer Camps and Tutorting

A couple days ago wrote about the benefits of hiring your kids or grandkids this summer. Several of my readers wrote to ask “what about payroll taxes?”

Students who can be claimed as Dependents may, in most cases, be exempt from having any taxes withheld from his or her wages, if (a) he or she paid no taxes last year, and (b) expects to earn less than $6,100 this year.

One caveat: They must file a new Payroll Withholding Form (W-4),
with their employer. Last year’s has now expired. 

To refresh your memory on details of hiring your own kids,
see Chapter 6 of “Home Business Tax Savings, Made Easy!”

IF YOU USE A FLEX PLAN FOR CHILD CARE COSTS, READ THIS: 

Your child care expenses exceed the amount that you pay through your Flexible
Spending Account (FSA), you may still be able to claim the Dependent Care Credit. 

The most you can fund through an FSA is $5,000, but the credit applies to as much
as $6,000 of eligible expenses if you have two or more children under 13 years old.

No credit is allowed for any child care costs that are paid through your flex plan (because you didn’t pay taxes on that money to begin with), but if your total costs were $6,000 or more, the extra $1,000 would be eligible for credit, which you would claim on Form 2441.

That extra $1,000 deduction would add some $200-$250 to your year-end tax refund.

DON’T FORGET TO DEDUCT SUMMER CAMPS, TUTORING, SPORTS CAMPS… 

Remember that Day Camp costs qualify for the dependent care credit also. So if you
send your school-age child to almost any “special day camp” for sports, computers,
or drama for example, don’t forget to deduct the cost.

Whether your student is attending a camp to “get ahead” or to “catch up,” it can qualify.
Even camps for learning better study skills, for learning to read more quickly and with
better comprehension, or to practice better writing skills – they all qualify. 

Remember, your child must be under 13, and expenses must be incurred so the parents
can work – otherwise they are “education expenses,” which is not as good for write-off as
child care.

Posted in HIRING your KIDS