Dependent-Care Money Okay for Pre-K

published 9 June 2008

My older son attends a private school this year, and it has changed from a preschool to a pre-kindergarten. My husband and I both work and I am enrolled in a dependent-care spending account at work. Can I use the money for the cost of pre-kindergarten tuition?

You're in luck. Even though you generally can't use the dependent-care money for education, the IRS draws the line at kindergarten. That means anything below that -- whether it's called nursery school, preschool or pre-K -- can be paid for with dependent-care account money, says Mark Luscombe, principal analyst with CCH Tax and Accounting. For kindergarten and above, you can only include the cost of care before and after school.

You also can use the dependent-care money for summer camp for a child of any age, as long as it's a day camp and not an overnight camp. Summer school and tutoring are considered to be education expenses, however, and don't qualify.

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The rules about which expenses qualify for the dependent-care account are very similar to the expenses that count for the dependent-care tax credit. See IRS Publication 503 Child and Dependent Care Expenses for more information. Since you can't double-dip tax benefits, you can't use the same expenses for both the dependent-care tax credit and the dependent-care account.

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As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.