Family
Summer camp counts: the dependent care credit
If you pay someone to watch your child so you can work, the government pays part of the bill. For 2026 it pays more, up to 50% of the cost, and day camp is the expense families most often leave off.
Many parents have no idea that summer camp and child care can reduce their taxes. That is what the child and dependent care credit is for, and it is the credit most often missing from self-prepared returns. The 2025 tax law raised the top rate to 50% starting with 2026 returns, and Colorado pays 70% of whatever the federal credit turns out to be, so for a family with child care bills the two together grew twice over this year.
Who qualifies
Three tests. The person cared for is your dependent child under 13, or a spouse or dependent of any age who cannot care for themselves and lived with you more than half the year. A child who turns 13 in July qualifies for expenses through the birthday, not after. Why you paid for care: so that you could work or look for work. If you are married, both of you must work, be looking for work, be a full-time student, or be unable to care for yourself. One spouse at home by choice means no credit. Who claims it: the parent the child lives with. Divorced parents: the custodial parent claims this credit even in a year the other parent claims the child tax credit under a Form 8332 release.
The credit cannot exceed the earned income of the lower-earning spouse. A student spouse, or one unable to care for themselves, is treated as having $250 of earned income for each month of school ($500 with two or more qualifying people), so a family with one worker and one full-time student still qualifies, at a reduced level.
What counts as care
The test is whether the expense is for the child’s well-being and protection while you work, not whether it is educational.
| Counts | Does not count |
|---|---|
| Day care centers and home day care | Overnight camp, even one week of it |
| Preschool and nursery school | Kindergarten and up: school tuition |
| Before- and after-school programs | Tutoring, music lessons, sports leagues |
| Summer day camp, including sports and specialty camps | Food, clothing and entertainment billed separately |
| Nannies, babysitters and au pairs, including their payroll taxes | Care by your spouse, by the child’s other parent, or by your own dependent |
| Care by a grandparent or older sibling who is not your dependent | Care paid by a dependent care FSA (already tax-free) |
The expense limit is $3,000 for one qualifying person and $6,000 for two or more, per family, reduced dollar for dollar by anything reimbursed through a dependent care FSA. Day camp is the one families miss most often. A soccer camp, a coding camp or a camp at the recreation center all qualify if the child comes home at night; the theme does not matter. Overnight camp never qualifies.
You will need each provider’s name, address and taxpayer identification number: a Social Security number for an individual, an employer identification number for a center. Ask when you pay, not in April; Form W-10 is the IRS form for requesting it. If you pay a nanny or regular sitter in your home, you may also be a household employer with payroll obligations of your own.
The new rates for 2026
The credit is a percentage of your qualifying expenses, and the percentage depends on adjusted gross income. The rate starts at 50% for AGI of $15,000 or less and falls one percentage point for every $2,000 of AGI above that until it reaches 35%. It holds at 35% until AGI passes $75,000 single or $150,000 joint, then falls one point for every $2,000 (single) or $4,000 (joint) to a 20% floor, where it stays no matter how high income goes. Before 2026 the top rate was 35% and nearly everyone with a full-time job got 20%.
| Adjusted gross income | Single / head of household | Married filing jointly |
|---|---|---|
| Up to $15,000 | 50% | 50% |
| $15,000 to $45,000 | falls from 50% to 35% | falls from 50% to 35% |
| $45,000 to $75,000 | 35% | 35% |
| $75,000 to $150,000 | falls from 35% toward 20% | 35% |
| $150,000 to $210,000 | 20% | falls from 35% to 20% |
| Above $210,000 | 20% | 20% |
The single rate reaches 20% at $105,000 of AGI; the joint rate reaches 20% at $210,000. Breakpoints come from the law’s formula and are not indexed for inflation.
Worked example: three families, two children, $6,000 of qualifying expenses
| AGI | Rate | Federal credit | Colorado credit (70%) | Together | |
|---|---|---|---|---|---|
| Single parent, part-time work | $14,000 | 50% | $3,000* | $2,100 | $5,100 |
| Couple, one earner plus a student | $60,000 | 35% | $2,100 | $1,470 | $3,570 |
| Couple, two earners | $170,000 | 30% | $1,800 | $0 (over Colorado’s $60,000 line) | $1,800 |
The couple at $170,000 is $20,000 past the joint line, five steps of $4,000, so the rate drops five points from 35% to 30%. Under the old law the same family got 20%, or $1,200. *The federal credit is not refundable, so the single parent at $14,000, who owes little federal tax, may use only part of the $3,000; Colorado computes its 70% as if the federal credit were fully refundable and pays it out, which is why the state credit matters most to that family.
FSA or credit?
Many employers offer a dependent care FSA. For 2026 the limit rises to $7,500 per household, from $5,000. You cannot use the same dollars twice, so it is a choice. FSA money comes out of your paycheck before federal income tax, Social Security and Medicare tax, and Colorado tax; for a family in the 22% federal bracket the saving is 22% plus 7.65% plus 4.40%, about 34 cents on the dollar. The credit is worth its rate, 20% to 50%, on at most $6,000 of expenses, plus Colorado’s 70% of that for families under $60,000.
Worked example: FSA versus credit, two families, $7,500 of care
| Couple, $55,000 AGI, 12% bracket | Couple, $190,000 AGI, 22% bracket | |
|---|---|---|
| Credit route: federal credit on $6,000 | 35% = $2,100 | 25% = $1,500 |
| Credit route: Colorado credit | 70% = $1,470 | $0 |
| Credit route total | $3,570 | $1,500 |
| FSA route: $7,500 pre-tax (12% + 7.65% + 4.4% / 22% + 7.65% + 4.4%) | $1,804 | $2,554 |
| Better choice | The credit, by $1,766 | The FSA, by $1,054 |
With $7,500 in the FSA there is nothing left for the credit; the $6,000 limit is reduced by every FSA dollar. A middle path, $1,500 in the FSA and $6,000 to the credit, rarely beats the better of the two pure routes. Rounded; the FSA also lowers AGI, which can nudge the credit rate and other phase-outs. FSA elections are made at open enrollment in the fall, for the following year, and are hard to change, so run this before you enroll.
Behind the scenes
The IRS matches the provider’s identification number on Form 2441 against the provider’s own return. A sitter paid in cash who did not report the income is the usual reason a credit gets questioned, and the family, not the sitter, gets the letter. When a provider refuses to give a number, a preparer documents the request and claims the credit anyway under the due-diligence rule, and expects the IRS to ask about it. When a grandparent is the provider, the question is whether the grandparent reports the income; the credit on one return and the missing income on the other are matched by the same computer.
The Colorado side
For 2026 Colorado pays a single refundable credit of 70% of the federal child and dependent care credit, for families with AGI of $60,000 or less, computed as if the federal credit were fully refundable; the old 50% credit and the separate low-income version were merged into this one. Because it piggybacks on the federal credit, missing the federal credit means missing this one too, and because it is refundable, a low-income family that cannot use the federal credit still gets Colorado’s. It is claimed on Form DR 0347 with the federal Form 2441 attached. FSA money also escapes Colorado tax, which is part of the FSA’s edge for families over $60,000.
What to bring your preparer
- Each provider’s name, address and tax ID number (EIN for a center or camp, SSN for an individual), and the amount paid to each
- Year-end statements from day care centers and camps, which usually carry the EIN
- Your W-2 showing any dependent care FSA amount in Box 10
- Each child’s date of birth, so expenses after a 13th birthday can be separated
- If one spouse was a student or disabled: the months, for the deemed-income rule
- For a nanny or regular sitter in your home: what you paid, for the household employment rules
- For next year: expected care costs, so the FSA-versus-credit comparison can be run before open enrollment
Questions people ask
My mother watches the kids and I pay her. Does that count?
Yes, if she is not your dependent and you report her name, address and Social Security number. She must report the income on her own return. Paying your spouse or the child’s other parent never counts.
Does private kindergarten count?
No. Kindergarten and higher grades are education, not care. Before- and after-school care at the same school does count, as long as it is billed separately from tuition. Preschool counts in full.
I stayed home this year and my spouse worked. Any credit?
Not unless you were a full-time student, looking for work, or unable to care for yourself. Both spouses have to have a work-related reason for the care.
We paid for camp but the provider will not give us a tax ID number.
Ask in writing with Form W-10 and keep a copy. If they still refuse, the credit can be claimed with a statement that you tried. Expect the IRS to ask about it.
I never claimed this. Can I go back?
Generally for three years. Bring the receipts. The 50% rate applies only to 2026 and later; earlier years use the old rates, which for most working families meant 20%.
Ask for the provider’s tax ID when you pay, not in April
The credit needs each provider’s name, address and identification number. A camp or center has an EIN on its invoice; a sitter needs to give a Social Security number. Form W-10 is the polite way to ask.