Can I Deduct Kindergarten Tuition On My Taxes?

May, 01 2023 by Anne Davis, EA

The short answer is no. Kindergarten tuition is not deductible because the costs to attend kindergarten are considered educational expenses and not childcare expenses. This includes kindergarten tuition paid to a private school. However, certain other costs qualify for the Child and Dependent Care Expenses credit. Something to note is that a tax credit is better than a tax deduction because a credit will reduce your tax bill dollar for dollar.

The Child and Dependent Care Expense credit is available to taxpayers who meet the requirements and have a qualifying individual. The qualifying individual can be a child who may be claimed as a dependent, a disabled spouse, or other persons who could not take care of themselves due to a physical or mental ailment and met the other qualifying conditions. In this blog, we will limit the discussion of this credit as it applies to a qualifying child.

A qualifying child must meet all the following:

1. Must be the taxpayer’s son, daughter, stepchild, foster child, sibling, stepsibling, or a descendant of any of them;
2. Must be under the age of 13 or not physically or mentally able to care for himself or herself.
   • If the child turns 13 during the year, the expenses up to the last day the child is under 13 are the only expenses that qualify for the credit, unless the child is physically or mentally unable to care for themselves.
   • If the child was born or died during the year, the child is treated as having lived with the taxpayer for more than half the year if the taxpayer’s home was considered the place where the child lived for more than half the time the child was alive;
3. Must be claimed as a dependent by the taxpayer. (However, there is a special exception to this rule for taxpayers who are divorced or separated, and will be discussed below.);
4. Must live with the taxpayer for more than half of the year;
5. Must not provide for more than one-half of their own support during the year; AND
6. Must be younger than the taxpayer claiming him or her.

There are certain circumstances where a taxpayer did not claim their child as a dependent on their return because of a custodial agreement they have with the other parent, even though the taxpayer was the child’s custodial parent during the year. For tax purposes, a custodial parent is the parent with whom the child lived for most of the year. If the noncustodial parent claimed the qualifying child as a dependent on their return because of a prior agreement, the custodial parent may still be able to claim the Child and Dependent Care Expenses credit if all the other requirements were met.

Examples of costs that qualify for the Child and Dependent Care Expenses credit:

• Nursery school, preschool, or other similar programs that are below the level of kindergarten
• Before and after-school care
• Cost of babysitters
• Day camps or similar programs, even if the camp or program specializes in a particular activity. Overnight camps do not qualify.

It is important to remember that to be a qualifying expense, the primary reason for the care must be to care for the well-being of the child. If the care is not for the primary purpose of taking care of the child, then the expense does not qualify. Generally, summer school and tutoring expenses do not qualify.

Child-care Expense Requirements:

• The child-care expenses must be incurred so that the taxpayer (and spouse, if filing jointly) can work or look for work. The credit is only allowed if there is earned income for the year. The credit is still available if one of the spouses was a full-time student or disabled.
• Payments made to the following relatives do not qualify for the credit. (However, payments made to relatives that are not mentioned below do qualify for the credit):
  • Taxpayer’s spouse
  • The parent of the qualifying child
  • The taxpayer’s dependent
  • The taxpayer’s child who is under 19 at the end of the year, whether the child is a dependent or not.
• Expenses that are prepaid cannot be claimed for the credit until the year care is provided. For example, payments made in 2022 for childcare that will be provided in 2023, cannot be claimed until 2023.

For this credit, earned income includes:

• Wages and other taxable employee compensation
• Net self-employment income less the deductible portion of self-employment tax. Earned income is reduced by any net loss from self-employment.
• You can elect to include nontaxable combat pay as earned income when calculating the credit.
• If the spouse is a full-time student or disabled and unable to care for themselves, the spouse is considered to have monthly earned income equal to the higher of:
  • The actual income earned OR
  • $250 per month if there is one qualifying child OR
  • $500 per month if there is more than one qualifying child.

The spouse is considered to have monthly income only for the month or partial month that they are a full-time student or disabled. Let’s look at an example.

Example 1: Your spouse was a full-time student (or disabled) from September 1, 2022 – November 15, 2022. She has no other source of income. For the purpose of calculating the credit:

• Your spouse is deemed to have $750 of earned income if you have one qualifying child, calculated as three months x $250 per month = $750.
• Your spouse is deemed to have $1,500 of earned income if you have two or more qualifying children, calculated as three months x $500 per month = $1,500.

The Child and Dependent Care credit is a refundable credit equal to 20 – 35% of the smallest of:

• $3,000 ($6,000 for two or more qualifying children) of the cost of care.
• Taxpayer’s earned income, or
• Spouse’s earned income

Reporting the Credit on Your Tax Return:

• The credit is claimed on IRS Form 2441, Child and Dependent Care Expenses. The taxpayer must report the childcare provider’s name, address, and identification number.
• Care providers can be penalized for not providing information, like their identification number, or for providing incorrect information.
• If the care provider’s information is inaccurate or incomplete, the credit can be disallowed. It is possible that the credit may be allowed if you can show that you used due diligence when you reported the information on your tax return. You can show due diligence by:
  • Getting and maintaining Form W-10, Dependent Care Provider’s Identification and Certification or
  • Any document showing the caregiver’s SSN or EIN

In summary, kindergarten tuition is not deductible because the costs to attend kindergarten are considered educational expenses. However, qualifying childcare expenses are deductible. To protect your childcare credit in the event of an audit, I recommend that you have the childcare provider fill out Form W-10. Do not pay cash for the childcare but pay using a means that will leave a paper trail, such as by checks, credit card, or a cash application such as Venmo. Obtaining a statement from the childcare provider each year listing your child’s name, your address, the dates childcare service was provided, and the amount you paid for each date is essential. And remember, TaxAudit professionals are always ready to assist you if you receive an audit notice.