Is Preschool Tuition Tax Deductible?

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There is no tax deduction for preschool. You can qualify for a tax credit for preschool payments if you are sending your child to preschool so you can work or look for work. You are out of luck however, if you are a stay-at-home parent that sends his child to preschool because he believes in the benefits of preschool.


Limited Credit

Tax forms
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The maximum tax credit available is $3,000 for one child and $6,000 for two as of 2010. The credit is based on a percentage of your expenses, which declines as income rises. Persons making under $15,000 per year can claim 35 percent of childcare expenses. People who earn more than $43,000 can claim 20 percent of expenses.


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Flexible Spending

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If your employer offers a tax-deferred flexible spending account, you may be able to divert $5,000 to childcare. Routing the expenses through the FSA account will have the same effect as a tax deduction, as it lowers gross income. You cannot, however, use expenses routed through the flexible spending account to claim the child care tax credit.


Crafty Planning

Plan ahead
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If you have more than two children in preschool, your childcare expenses can add up quickly. You can get the most bang for your buck with a little planning. First, send the maximum amount of your childcare expenses through your flex account. If your expenses exceed $5,000, you can apply the difference to the tax credit.



Flex Spending Vs. Tax Credit

Crunch the numbers
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Since you can't claim both for the same dollars, it takes a little financial number crunching to figure out whether the FSA or tax credit is better. Kimberly Lankford, writing for Kiplinger's, notes that funds routed through an FSA avoid a tax rate of about 22 percent for the lowest bracket of earners. Those tax rates increase as income increases. So FSAs are usually best as income rises.



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