Parents of incoming Montessori preschool students often ask if their childcare expenses are tax deductible. The answer is no, but parents can apply for a tax credit if they need childcare in order to work or find work. Parents will also be pleased to know that the American Rescue Plan increases the credit received for the 2021 tax season.
If your child isn’t enrolled in a Montessori daycare or preschool, register this year to take advantage of the expanded The Child and Dependent Care Credit.
The Child and Dependent Care Credit
In California, you can claim the Child and Dependent Care Credit if your household meets the following criteria:
- You are working or looking for work
- If applicable, your spouse or domestic partner is
- Working or looking for work, or
- Physically or mentally incapable of caring for themself, or
- Is registered as a full-time student.
- Your child is younger than 13-years-old and lives with you for more than half the year
Additionally, if you’re married, your taxes must be filed jointly to show a federal adjusted gross income (AGI) below $100,000.
The AGI limit is raised to $438,000 for the 2021 tax season, as per the American Rescue Plan passed in 2021.
If you meet the rest of the expanded criteria outlined in the American Rescue Plan, you might qualify for a credit you couldn’t receive in the previous tax season. You can apply for credit by attaching the Child and Dependent Care Expenses Credit form to your 2021 federal return.
What you get from The Child and Dependent Care Credit
During typical tax seasons, you can receive up to $1,050 per child, and up to $2,100 for two or more children. For 2021, the maximum credit increases to $4,000 and $8,000 respectively. The credit amount is based on a percentage of your AGI and child care expenses. If you register your child at an authentic Montessori school, you can list the tuition as an expense.
The American Rescue Plan also expands the potential credit value.
Before, Californian households could write off 20-35% of their childcare expenses, with 35% allocated to households with AGIs of $15,000 or lower. Every additional $2,000 of income beyond $15,000 would decrease the credit percentage by 1%. This meant incomes of $43,000-$100,000 would have a 20% credit.
For 2021, the potential credit amount ranges from 20-50%, with 50% allocated to AGIs of $125,000 and lower. This is a substantial increase that allows households with AGIs of $183,000-$400,000 to recover 20% of their childcare expenses. From $400,000-$438,000, the 20% is gradually phased out.
Take advantage of the Child and Dependent Care Credit
If you qualify for the Child and Dependent Care Credit in the 2021 tax season, now is a great time to enroll your child in Montessori preschool.
Hill Point Montessori is dedicated to building confidence and lifelong skills, starting from infancy. Our preschool programs are designed for children 3 to 6 years old. Schedule an in-person tour to learn more, and please note that masks and social distancing are required.