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Katie started school this year.  I realized as she put her little backpack on and headed out the door, that she was growing up.  It was all at once overwhelming.

A few month's later, I was once again overwhelmed when I realized that I would be paying the equivalent of my college tuition every year for the next thirteen years assuming that Katie remains at her current school.  *Gulp*  And I have two more kids to go...

As painful as it is to write that check, it's absolutely the best option for Katie.  And of course, it's not that bad because it's tax deductible, right?  Well, sort of.  Generally, private school tuition is not tax deductible.  But there's a little exception that happens to apply to me this year:  expenses for a child in nursery school, pre-school, or similar programs for children below the level of kindergarten are considered childcare expenses, as opposed to mere educational expenses which are not.  And Katie is in Pre-K.

Remember my prior post about being a working mom and choosing a childcare option?  At least the playing fields are level in this one respect:  so long as it's a qualifying child care expense, you can deduct the cost of child care while you work or look for work.  The deduction is limited to care for your own children under the age of 13.  I guess those older kids can take care of themselves, which makes sense...  I know that I was babysitting at age 13.

The reporting requirements and the tax consequences vary depending on what kind of childcare you opt for.  To claim the credit for expenses at a qualifying childcare center, the center must meet federal and state requirements - but then, why would you ever not want it to?  The center should also have a total enrollment of at least six children (it's a wacky IRS requirement).  If you're not sure whether the center meets the criteria, ask.   Also ask the center for their tax ID number - the IRS requires that you include this information on your personal tax return.  It's been my experience that most childcare centers will actually issue a print out at the end of the year with the amount that you paid and their identifying information, including address and tax ID number.

And what do you get for your trouble?  A tax credit which can be fairly significant, depending on the amount that you paid and your income level.  The tax credit is equal to a percentage of the expenses that you actually paid less any reimbursements from any program or social services agency.  The credit starts at 35% of expenses if your adjusted gross income is less than $15,000 and phases out to 20% of expenses if your adjusted gross income is more than $43,000.

The rules for paying and reporting in-home daycare with a nanny or babysitter are much more complex.  Keep reading... I'll be sure to include them in a subsequent post!