Child care expenses are only deductible/eligible for credit in the year the care was provided. A forfeited deposit, even for reasons beyond your control, isn't for care, and therefore not eligible for the credit. Depending on the terms of the contract, you may be able to pursue a refund.
From IRS Publication 503:
Fees you paid to an agency to get the services of a care provider, deposits you paid to an agency or preschool, application fees, and other indirect expenses are work-related expenses if you have to pay them to get care, even though they aren't directly for care. However, a forfeited deposit isn't for the care of a qualifying person if care isn't provided.
Example 1.
You paid a fee to an agency to get the services of the nanny who cares for your 2-year-old daughter while you work. The fee you paid is a work-related expense.
Example 2.
You placed a deposit with a preschool to reserve a place for your 3-year-old child. You later sent your child to a different preschool and forfeited the deposit. The forfeited deposit isn't for care and therefore not a work-related expense.
Child and dependent care expenses must be work-related to qualify for the credit. Expenses are considered work-related only if both of the following are true:
- They allow you (and your spouse if filing jointly) to work or look for work.
- They are for a qualifying person's care.
Please see this TurboTax article and this IRS webpage (Publication 503) for more information.
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