Eligibility of Extended-Care Expenses

• Parents of qualifying children younger than kindergarten age may deduct expenses for eligible preschools and nursery schools, as these expenses are considered deductible. Parents with children in kindergarten or higher grades may deduct expenses for before- or after-school programs if the expenses are separate from direct educational expenses. One example of eligible after-school care would be for a child in a half-day kindergarten program in the morning, and an afternoon daycare program with the same school. Expenses for sending the child to the morning kindergarten program would be excluded from eligible daycare expenses because the fees are directly tied to instruction. The afternoon program for daycare only would be eligible for deduction.
  
  

Additional Requirements

• Extended-care expenses are considered eligible if the expenses were for a qualifying child during the tax year to allow a parent to work or seek employment. The IRS requires taxpayers to have earned income for the tax year child- and dependent-care credits are claimed. For those married filing jointly, one spouse is considered to have earned income if he was a full-time student or was unable to provide childcare because of a disability. Taxpayers must file as single, head of household, widow or widower with dependent children, or married filing jointly to receive the child- and dependent-care expense credit.
  
  

Eligible Children

• Children must be considered as qualifying individuals by the Internal Revenue Service in order to claim the child- and dependent-care tax credit. The children in before- or after-school programs must be a dependent under age 13, or a dependent that was not able to care for herself during the tax year. The dependent must also have lived with the taxpayer for more than half the year.
  
  

Credit

• At the time of publication, taxpayers making under $15,000 per year in adjusted gross income may claim a full credit of 35 percent of eligible childcare expenses. This percentage decreases as adjusted gross income increases to a minimum credit of 20 percent for those exceeding $43,000. Eligible expenses on which the credit is calculated are capped at $3,000 for a single qualifying dependent, and $6,000 for two or more dependents.