The tax season is upon us and a common question at Montessori preschools is whether preschool expenses can be used as a deduction. The question will have a different answer for many parents than it did in previous years, and some households will discover that they are no longer eligible for the tax credit they used in their 2018 filing.
Who Qualifies for the Tax Credit
In order to qualify for the tax credit, you must have reportable earned income. This applies to single parents as well as couples. In the case of couples, both parents are required to have reportable income. If either parent was able to work but did not, then the tax credit will not be available to you.
Childcare Tax Credit
Between 2019 and 2025, sweeping changes to the tax code are going into effect, including changes to how the child and dependent tax credit can be applied. While it is not a deduction, the tax credit can be applied to qualifying households and may cover up to $3000 of costs for one child or as much as $6000 for two or more children. Attending school or being unable to work may qualify in some cases.
Childcare Not Education
The IRS is very specific about what the tax credit is meant for, specifically to allow one or both parents to be employed and earn taxable income. The credit is not intended to pay preschool educational expenses, but to assist in child care costs while applicable parents work. Parents who are not employed while their children attend preschool are not allowed to claim any childcare expenses during periods of unemployment.
Employment is the Key
Once available for parents who were seeking employment, the new tax code is only for those who have earned income. If you were seeking employment while your child attended preschool but did not have any taxable income as defined by the Internal Revenue Service, you cannot use the credit.
Please study the changes in the U.S. tax code carefully. Many of the changes going into effect over the coming years will have an impact on what you can claim, including the costs associated with your child’s preschool attendance. Consult a professional accountant or tax service with any questions or concerns you may have before filing this year’s returns.