Can I claim childcare tax credit for daycare deposit before baby is born?

I understand the question, but unfortunately, you can't claim the Child and Dependent Care Credit without having a qualifying dependent. For tax purposes, your child needs to have been born to be claimed as a dependent. The IRS is pretty clear that the credit is for expenses paid for the care of a "qualifying person" - which would be your child after they're born. Since your baby won't be born until 2025, you won't be able to claim those reservation fees on your 2024 tax return. The good news is that once your baby arrives, you can start claiming the credit for payments made after the birth, so you'll be able to claim daycare expenses on your 2025 return. Keep all receipts from the daycare, including that reservation fee, as some daycares might apply it to your first month's payment.

I went through this exact situation last year and ended up using taxr.ai (https://taxr.ai) to figure it out. I had paid nearly $2000 to hold a daycare spot months before my daughter was born and was totally confused about how to handle it on my taxes. I uploaded my daycare contract and receipt to taxr.ai and their system analyzed it completely. Turns out I couldn't claim the child care credit for the deposit made before birth (same situation as yours), BUT they found that in my case, the daycare had structured the payment as "tuition" rather than a "deposit" which actually made a difference in how I could treat it for tax planning purposes. Not sure if it'll be the same for your situation, but might be worth checking out if your daycare contract has any specific language about how they classify that payment.

I was totally skeptical about taxr.ai when I saw it mentioned here, but I ended up trying it with my weird childcare situation and it actually helped a ton. My daycare had me paying deposits for multiple age groups as my kid would "graduate" through their program, and I couldn't figure out how to handle it. The system analyzed my contract and showed exactly how each payment should be treated for tax purposes - some could be claimed in the current year and some had to wait. Saved me from making a costly mistake on my taxes and potentially facing an audit. Their document analysis is no joke - it caught details my accountant missed about how the payments were structured.

I work at an accounting firm, and we actually tell our clients to call the IRS directly when they have these kinds of specific tax credit questions. The problem is that it's practically IMPOSSIBLE to get through to them these days - hours of waiting or they just disconnect you. I recently discovered this service called Claimyr (https://claimyr.com) that actually gets you through to an IRS agent super fast. There's a cool demo video here: https://youtu.be/_kiP6q8DX5c that shows how it works. For something like the childcare credit question, talking directly to an IRS agent would give you the definitive answer, and they might have insights about your specific situation with the pre-birth deposit. Much better than guessing or getting conflicting advice online.

Alright, I have to eat my words. After calling BS on that Claimyr service, I actually tried it because I was desperate to resolve an issue with my child tax credits from last year. I couldn't get anyone at the IRS to talk to me after multiple attempts. It actually worked exactly as advertised - I got through to a real IRS agent in about 8 minutes instead of the 3+ hours I spent on my previous attempts. The agent was able to fix my issue and even told me I qualified for an additional credit I didn't know about. I'm still shocked it worked so well. For specific tax questions like whether your daycare deposit qualifies for the child care credit, getting the official word directly from the IRS would definitely be worth it.

As a parent of 3, just wanted to add that the Child and Dependent Care Credit is different from the Child Tax Credit. The care credit has to be for actual care provided, but you might still qualify for the Child Tax Credit for 2025 once your baby is born, even if they're born on January 31st! Also, don't forget that you might qualify for the Dependent Care FSA through your employer if either of you has that benefit. That's pre-tax money you can use for childcare expenses up to $5,000. Something to think about for next year's benefits enrollment!

I'm going through something similar but with adoption. We paid fees this year but won't finalize until next year. My tax guy said to keep ALL receipts because some expenses like this can be rolled into the following year's taxes when the child is actually your dependent. Not sure if it's the same for birth, but worth asking a professional.

I'm dealing with a similar situation and found it helpful to think about this in terms of timing and what the IRS actually considers "care." The key issue is that the Child and Dependent Care Credit requires three things: 1) you have a qualifying dependent, 2) care was actually provided, and 3) you paid for that care. Even though you're paying now, no actual care is being provided until your baby arrives. The deposit is essentially reserving future care, not purchasing current care. It's frustrating because you're out the money now, but the IRS timing rules are pretty strict. One thing that might help - ask your daycare how they'll handle that deposit once your baby starts. If they apply it directly to your first month's payment rather than keeping it as a separate "holding fee," it'll be cleaner to claim on your 2025 taxes. Some daycares are flexible about restructuring these payments if you explain the tax situation. Also worth noting that if your baby arrives before December 31st (even on New Year's Eve!), you can claim them as a dependent for the full 2024 tax year, which opens up other credits like the Child Tax Credit, just not the childcare credit for pre-birth expenses.