Is Preschool Expense Deductible From Gross Income on 1040?

Preschool expenses, like other child-care expenses you pay so that you can work, allow you some potential tax breaks with the child and dependent care credit. These child-care expenses are not deductible from your gross income, but instead, you can receive a portion of your qualifying expenses back as a tax credit. A tax credit reduces any tax that you owe, dollar for dollar, whereas a deduction reduces only your taxable income.

Child and Dependent Care Credit

You must have earned income to claim the child and dependent care credit, and if you are married filing a joint return, both you and your spouse must have earned income. You can use up to $3,000 in qualifying care expenses for one child, or $6,000 for two or more children toward the credit. The credit is a percentage of the actual expenses, depending on your earned income, and can be from 20 to 35 percent of the allowable expenses or your earned income, whichever is smaller.

Qualifying Child

A child eligible for the credit must be under age 13. The child must also be your dependent. A dependent is a person for whom you can claim an exemption on your income tax return under conditions set by the IRS. For you to claim the credit, the child must also live with you for at least half the year.

Qualifying Expenses

Expenses for care of a qualifying child so that you can work are qualifying expenses. Preschool expenses for a child below kindergarten age are for care, and qualify for the credit. In addition, fees paid to a day care center, or in-home care provider also qualify for the credit. After-school and before-school care expenses so that you can work also qualify for the credit, as well as day-camp expenses as part of a summer program for a qualifying child.

Prohibited Expenses

Any expenses paid for a child to attend kindergarten or a higher grade do not qualify for the credit, as these are considered education expenses and not care expenses. Expenses paid for an overnight camp also do not qualify for the credit. A deposit you paid to secure a preschool space for your child, but later forfeited because you chose another preschool is not a qualifying expense.