Q: My son is 4 and he goes to pre-K and a private school. Children are required to go to school at 5 for kindergarten. Can I write off the tuition I pay the school for pre-K as a child care expense?
A: Nursery school and other prekindergarten costs generally qualify for the Child and Dependent Care Credit because the educational benefits are considered incidental to the child care costs. The credit is limited to a maximum of $3,000 per child and $6,000 for two or more children in preschool. In addition, the credit is limited by the amount of your income and in order to qualify you must be paying someone in order for you to work. See IRS Form 2441 and its instructions and IRS Pub 503 for more information.
Q: What do I need to do to claim the child and dependent care credit for my daughter in day care?
A: If you are paying for child care in order that you can work, you will need the name, address and EIN or SSN of the provider and the address of where the services are provided. Keep track of the checks or payments that you make to the provider and the period of time covered by each payment. This information is used to prepare the tax return, but is not submitted to the IRS.
You will need to complete Schedule 2 if you are preparing a 1040A Tax Return, or Form 2441 if you are completing a 1040 Tax Return in order to claim your child care tax credit.
Q: Can a noncustodial parent claim the child tax credit?
A: The only parent allowed to claim the child tax credit for a qualifying child is the parent claiming the dependency exemption. If the custodial parent releases a claim to exemption for the child on IRS Form 8332 and the noncustodial parent attaches the release to the noncustodial parent's return, the noncustodial parent would be entitled to the child tax credit, assuming the child is under age 17.
Q: What is the American Opportunity Tax Credit for higher education expenses?
A: The American Opportunity Tax Credit is a modification to the Hope ScholarshipCredit. The credit is a maximum of $2,500 for qualified higher education expenses incurred for each eligible student including you, your spouse and your dependents. The credit is equal to 100 percent of the first $2,000 of qualified expenses plus 25 percent of the next $2,000 of qualified expenses. Up to 40 percent of the credit is available as a refundable credit.
The credit is not available to taxpayers who file married separately, are nonresident aliens, have too high a modified adjusted gross income, or are listed as a dependent on another person's tax return. Complete details on who can claim the credit, who is an eligible student, the definition of qualified expenses, recapturing of the credit and avoiding claiming double tax benefits (for example, you cannot take the credit in the same year you claim a tuition and fees deduction for the same student) can be found in IRS Pub 970.
Through the AARP Foundation Tax-Aide program, AARP Foundation is providing online tax counseling as a public service, and cannot guarantee the accuracy of the information provided. Your taxes are your responsibility. You are solely responsible for what you do in your own tax situation.
The AARP Foundation Tax-Aide Program is a volunteer-run, free tax-preparation and assistance service offered to low- and middle-income taxpayers with special attention to those age 60 and older. Our volunteers are trained and IRS-certified to understand individual federal-tax issues. Our volunteers provide tax assistance as a public service and cannot guarantee the accuracy of the information provided.