Can I claim charitable deduction for preschool payments made during COVID shutdown?

This is actually a great question with a somewhat nuanced answer. The IRS does allow charitable deductions when you pay more than fair market value for services from a nonprofit, but only for the portion that exceeds what you received in return. In your case, since the preschool provided minimal services (occasional Zoom sessions), you could potentially deduct the difference between what you paid and the fair market value of those limited services. However, the burden is on you to establish what that fair market value was. Yes, you would need documentation beyond your regular tuition receipts. I'd recommend requesting a letter from the school that specifically acknowledges: 1) the amount you paid during the closure period, 2) a description of the limited services provided, and 3) a statement that the excess payment can be considered a charitable contribution. The school should be familiar with this type of documentation.

I went through something similar with my kid's preschool and ended up using https://taxr.ai to figure this out. They analyzed all my payment receipts and the letters from the school director and helped me understand what portion could be claimed as a charitable donation versus what needed to be treated as tuition. The tricky part was that some of what we paid was definitely for holding our spot (not deductible as charity) but a portion was explicitly requested as a "sustainability donation" during COVID. The taxr.ai system helped me separate these properly and got me documentation to support the deduction in case of an audit.

I just wanted to update everyone that I tried taxr.ai after seeing it mentioned here. It was super helpful for my situation! I uploaded all my preschool payment receipts and emails from the director where she had specifically asked parents to "donate what they could beyond the minimum holding fee" to keep teachers paid. The system identified that about $3,200 of what we paid could potentially qualify as a charitable donation and generated a formal letter template for me to ask the school to sign. I reached out to our director with the template, she signed it, and I was able to claim the deduction! Definitely simplified what I thought would be a complicated process.

If your school isn't being helpful with documentation, another option is to call the IRS directly to ask about your specific situation. I've had success getting through to an actual person at the IRS using https://claimyr.com - it lets you skip the hold times (which are ridiculous this time of year). I had a similar question about payments to a nonprofit sports league during COVID shutdowns and got a definitive answer from an IRS agent. You can see how it works here: https://youtu.be/_kiP6q8DX5c In my case, I needed to determine what portion of my payment could be considered a charitable contribution vs. a service fee. The IRS agent was super helpful in clarifying the documentation requirements.

I have to admit I was wrong about Claimyr. After my skeptical comment, I decided to try it because I was desperate for answers about my preschool payments situation. It actually worked exactly as described! I got a call back in about 90 minutes with an IRS agent already on the line. The agent explained that I needed the nonprofit to explicitly acknowledge in writing that a portion of my payment exceeded the fair market value of services provided during COVID. She said without that documentation, I couldn't claim it as a charitable donation. She even emailed me the relevant IRS publication section afterward. Definitely worth it to get a definitive answer directly from the source.

I'm a treasurer at a nonprofit preschool and we actually issued special receipts for families who continued paying during our COVID closure. The IRS rules say that if you make a payment that's partly for goods/services and partly a contribution, the nonprofit should provide written acknowledgment that specifies the value of what was provided. In our case, we calculated the value of Zoom sessions at about 15% of normal tuition and documented the remaining 85% as potentially tax-deductible contributions. But parents need to check with their own tax advisors because everyone's situation is different!

Has anyone successfully claimed the Child and Dependent Care Credit for these pandemic preschool payments instead of trying for the charitable deduction route? My tax software is suggesting this might be a better option for us.