By Ken Berry, Esq.
Before parents ship their kids off to summer camp, they should be aware of a potential tax benefit. Depending on their situation, parents may qualify for a sizeable “dependent care” tax credit on their personal returns—a dollar-for dollar reduction in tax liability. But be aware that the rules have been modified, beginning in 2026.
Basic overview: The dependent care credit may be claimed for the costs of expenses to care for qualified dependents, including children under age 13 or elderly relatives you support, so you (and your spouse, if married) can be gainfully employed. Since the credit is frequently associated with expenses paid for young children, it is commonly referred to as the “childcare credit.”
The credit applies to the first $3,000 of expenses for one qualified child and $6,000 for two or more children. Previously, the applicable credit percentage was based on a sliding scale with a maximum credit of 20% for taxpayers with an adjusted gross income (AGI) above $43, 000. Thus, the credit for many of your clients maxed out at $600 for one child and $1,200 for two or more children.
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The One Big Beautiful Bill Act (OBBBA) adds a new wrinkle. Beginning in 2026, the credit percentage is generally increased within stated ranges for low-to-moderate income taxpayers. But the maximum for most high-income taxpayers remains capped at 20%. This limit kicks in when the AGI for single filers exceeds $105,000 of AGI and $210,000 for joint filers.
Pleasant tax surprise: The credit isn’t limited to just day care centers and other traditional childcare services. For instance, it can also be claimed for the cost of attending a summer day camp sponsored by the local Y or other organization. It may even be allowed for a special camp geared to improving a child’s skills at, say, soccer or a branch of academics. You may get a tax break for molding the next Pele or Einstein!
On the other hand, the cost overnight camp NOT qualify for the credit—no ifs, ands or buts. Parents may factor this into their decisions.
Note that there is another imitation for married couples. If only spouse works and the couple files a joint return, they can’t claim any tax credit. However, if one spouse is a full-time student or is disabled, they are treated as having monthly earnings of $250 for one child or $500 per month for two or more children.
Reminder: Don’t confuse the dependent care credit with the Child Tax Credit (CTC) available to parents of under-age-17 children. Clients may be able to claim both credits when they file their 2026 returns.
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