The longer you invest in a 529 plan, the more time your savings will grow tax-deferred. It may be tempting to use 529 plan savings to cover large expenses like tuition at a private K-12 school, but taking distributions too soon could jeopardize your college savings. A parent of the child who is being cared forīenefits of saving 529 plan funds for college.A sibling who is age 18 or younger, whether they are listed as a dependent or not.Another dependent listed on your tax return.You may not claim the Child and Dependent Care Tax Credit for expenses paid to: The forms require the day care’s name, address and Social Security or Employer Identification Number. To claim the credit for day care expenses, working parents must file IRS Form 1040 or IRS Form 1040NR.

You may also claim the credit if you pay for care for a spouse or other dependent who is incapable of self-care. Eligible families may claim a tax credit of 20% to 35% of a maximum $3,000 in child care and other related expenses for a child who is 12 years old or younger (the dollar limit is $6,000 for two or more dependents). Parents may be able to save money on day care costs by claiming the Child and Dependent Care Tax Credit. is around $11,000 per year for infants, $10,000 per year for toddlers and $8,800 for 4-year old children.

The average cost of center-based child care in the U.S. Similar to college tuition costs, child care costs have been rising faster than inflation.Īverage annual day care costs vary by state and the child’s age. How much does day care cost?Īccording to a 2018 report from Child Care Aware, in 28 states the cost of center-based day care is greater than one year’s worth of tuition and fees at an in-state public 4-year college. Under the new law, costs of day care and preschool are not considered qualified 529 plan expenses. However, the Tax Cuts and Jobs Act of 2017 expanded 529 plan qualified expenses to include up to $10,000 per year in tuition expenses for elementary and secondary schools. If a 529 plan distribution is used to pay for day care, the earnings portion of the distribution is subject to ordinary income tax and a 10% penalty.ĥ29 plans were originally created to help families save for college. Day care is not considered a qualified 529 plan expense.

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