How parents can take advantage of the 'best summer-camp tax break in years'

Andrew Keshner

Parents still have to watch for the IRS fine print

New tax rules for 2026 offer some extra help to families juggling summer-camp costs.

School's out and summer's here.

For many kids, that means camp. For many of their parents, that means financial juggling to pay for those camp experiences.

There are approximately 26 million children off to summer day camps and sleepaway camps, said Henry DeHart, CEO of the American Camp Association.

It's a new season but there's a recurring theme. Camps are coping with higher expenses, like many businesses. The costs to hire staff, feed campers and maintain facilities have all become more expensive in recent years, he said.

That can filter down to higher camp bills.

Last year, families spent a median of $110 a day on day camps and $214 on overnight camps, according to ACA research. That price tag masks a range of options, and nine in 10 camps offer discounts and financial help, he noted.

Beginning this year, the tax code may help families more with their camp budgets.

A child-care tax credit is becoming more generous, particularly for lower-income households. Meanwhile, workers can now stash up to $7,500 in specialized flexible-spending accounts, up from $5,000.

The higher FSA limits could save parents thousands of dollars in taxes, financial planners said. "I'm telling clients this is the best summer-camp tax break in years, and most of them don't know it exists yet," said Jeff Judge, managing partner at Chesapeake Financial Planners in Forest Hill, Md.

The changes were signed into law under last year's One Big Beautiful Bill Act, which reshaped much of the tax code. Yet taking advantage of the tax breaks is not as straightforward a task as other camp-related duties - like remembering to label every T-shirt and pair of socks campers bring.

The stakes are certainly higher than misplaced socks. If families don't plan ahead, they can miss the tax breaks or watch money vanish from their flexible-spending accounts.

"This is where tax planning becomes so vital," said Miklos Ringbauer, founder of MiklosCPA, based in Southern California. "If you overfund your FSA, you lose that money."

The improved tax breaks may produce real savings for families, said DeHart. "My hope is that it will open up the possibility of camp to some families that don't think they can afford camp."

More money in flexible-spending accounts, more tax savings

Dependent-care flexible-spending accounts received an overhaul in the new tax law. This is where many advisers say the bigger tax savings lay.

Starting this year, people can put up to $7,500 in these FSAs. Their employers first have to increase the maximum contribution to this amount.

These dependent-care FSAs are different from healthcare FSAs. The new tax law did not change the healthcare FSA contribution maximum; for 2026, the limit is $3,400.

Many employers have increased the limit but average worker contributions are largely the same, said Gary Robinson, vice president of client health-plan design strategy at HealthEquity. Though higher limits help, he said the bigger opportunity is making sure workers know about the financial payoffs for these accounts.

The money in these accounts is pre-tax, going in before federal and state income taxes and payroll taxes can take their cut. That's a big deal, especially for higher-income households, said Judge.

An FSA "shelters income from taxes at your marginal rate, so a client in a higher bracket who maxes out at $7,500 saves more than the [child-care tax credit] would ever give them," he said.

Suppose a household with two kids made around $200,000 with their marginal income-tax rate at 22%. Depending on the state, their combined tax rate would be almost 40%, said Richard Pon, a San Francisco-based accountant and financial adviser. Their tax savings using the FSA could be almost $2,100 compared to the $1,200 tax savings from the credit.

The savings increase for even richer households. A household with two kids in the 32% bracket would avoid nearly $2,700 in taxes with the FSA, according to Pon's estimates.

Know your tax credits for kids. Just one counts for camp costs.

Parents should also pay attention to the Child and Dependent Care Credit, which is intended to chip in for a range of child-care costs that enable parents with kids under age 13 to work or stay on the job hunt. (Don't confuse that with the Child Tax Credit that goes to families with kids up to age 17 and is not relevant here.)

Along with day camp and traditional day care, the credit can be used for expenses such as nannies and babysitters, said Andy Phillips, vice president of the Tax Institute at H&R Block.

"The key factor is not the setting, but whether the expense is work-related and for the child's care rather than education, which creates opportunities for families with older children who have aged out of day care but still require supervision," he said.

Sleep-away camp costs don't count. "Overnight doesn't qualify because you're not working overnight," said Pon. Summer school and summer tutoring costs also aren't covered by the Child and Dependent Care Credit either, he said.

How the new tax law changed the rules for summer-camp costs

The One Big Beautiful Bill Act didn't increase the amount potentially covered by the child care and dependent tax credit. It remains up to $3,000 for one qualifying child and up to $6,000 for two or more children. Household income determines how much of those expenses are covered.

The law adjusted the credit's sliding scale to cover more of those expenses for parents who have either low or moderate incomes. The credit now applies to 50% of qualifying expenses for individuals with adjusted gross incomes up to $15,000 and married couples up to $30,000. Under the old law, only 35% of expenses were covered for people at that income level.

The credit lowers to 20% once individuals reach $103,000 AGI and married couples reach $206,000.

For households at the $103,000/$206,000 mark and beyond, Pon said the credit would save them $1,200 in taxes, if they had two qualifying children. It would be a $600 tax savings with one child.

Using the credit? Ask one question at your kid's camp.

To take advantage of the credit, parents need to take one key step: Ask the camp for its Employer Identification Number, which the IRS uses to identify businesses.

That's because the IRS form parents use to claim the Child and Dependent Care Credit will expect the name, address and Social Security number or Employer Identification Number of the care provider.

It's preferable to collect the EIN information in the summer, while it's top of mind and a camp's offices are up and running, Pon said. He's had clients forgo a portion of the credit because they couldn't track down the EIN at tax time.

Beware 'double dips' and 'use it or lose it' deadlines

While both tax breaks can help, families have to choose one - the IRS doesn't allow families to use both. It's something that people keep missing, said Judge. "You can't double dip, using FSA dollars and the credit on the same expenses. The IRS will catch it."

There's also no cherry picking to spend FSA money on camp costs while using the tax credit for other expenses like daycare costs, Pon said. They all get lumped together and when a "double dip" occurs, the IRS will not let the taxpayer claim the credit.

There's another pitfall for FSAs. They typically have a Dec. 31 deadline to spend all the money. There may be a grace period of several months, depending on the employer, Pon noted, but whatever isn't spent disappears - it doesn't roll over to the next year.

Open enrollment in the fall is typically when people can enroll in an FSA and decide how much to put in. At that point, it may be tough for people to know how much they'll pay for camp in the summer. If families like their kids' camps, it's worth asking this summer how much money the camps will charge next year.

Families with predictable care costs win from the higher limits, said Matt Chancey, founder of Tax Alpha Companies. Families with fluctuating costs should only set aside the money they are sure they'll spend.

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-Andrew Keshner

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07-07-26 1028ET