When are Education Costs Tax Deductible?

You might think that classes related to your family child care business (child development, curriculum, record keeping, parent communication, etc.) would be deductible education expenses.

Not necessarily.

Classes or workshops that you take before you were licensed are deductible, but classes or workshops that you are required to take to get a license are not deductible. So, in general, if you take a class on child development before you are licensed, it is deductible. However, if state law says that you have to have take a class in child development before you can get licensed, then it’s not deductible. Classes that you are required to take after you are licensed to maintain your license are deductible.

Any training you receive after you meet your state’s child care regulations is deductible as long as the training is related to your business (not classes on chemistry or engine repair!). Such training classes are deductible even if they don’t qualify for training credit according to your local regulation requirements. In other words, if you take a class on record keeping that doesn’t count towards your state training requirements, this class is still deductible.

All costs associated with obtaining NAFCC accreditation or a CDA are always deductible. Any classes to increase your skills to run your business are deductible. Classes offered by your local Child Care Resource and Referral agency are deductible.

College Education

You cannot deduct the cost of classes you take to receive a post-secondary undergraduate degree (any degree after high school) if this is your first post-secondary degree. The reason you cannot deduct this is because the degree qualifies you for a new occupation.

If you take college classes but are not trying to get a degree (classes on child development, for example), then they are deductible. If you already have a post-secondary degree and you are taking classes that qualify you for a second college degree (a degree in early childhood development or a masters degree in education, for example), then these classes are deductible.

(Yes, IRS rules can be complicated!)

I strongly recommend that family child care providers take everyopportunity to improve their skills by enrolling in professionaldevelopment classes and obtaining educational credentials such as the National Association for Family Child Care Accreditation, the Child Development Associate (CDA), and post-secondary degrees in early childhood education.

Time

If the cost of your class is deductible, then you can also count any time you spend on homework in your home when children are not present. If the class is not deductible, this time does not count.

Tom Copeland – www.tomcopelandblog.com

Image credit: https://www.regent.edu/program/edd-adult-education/

For more information, see my book Family Child Care Record Keeping Guide.