Are your Dependent Care Expenses entered correctly?
You must enter your Dependent Care Expenses in both the Provider and Qualifying Dependent screens of the Credit section of the program.
To do this, you will take the following steps:
- Federal Section
- Enter Myself
- Child Care Credit
- You will enter the provider information in the appropriate menu item and then you will select the Qualifying Person(s) section that applies to you.
The child will either already be listed on your return or NOT listed on your return. Please allocate the total expenses entered in the Provider section to each Dependent and Continue to save your information.
Do you have any qualifying children?
For you to receive the credit for Child and Dependent Care Expenses, you must list a qualifying person for which the expenses were paid. A qualifying person is:
- Your qualifying child who is your dependent and who was under age 13 when the care was provided,
- Your spouse who was not physically or mentally able to care for himself or herself and lived with you for more than half the year, or
- A person who was not physically or mentally able to care for himself or herself, lived with you for more than half the year, and either: (a) was your dependent, or (b) would have been your dependent except that: (i) he or she received gross income of $4,000 or more, (ii) he or she filed a joint return, or (iii) you, or your spouse if filing jointly, could be claimed as a dependent on someone else's current year tax return.
If the person for whom you paid the expenses does not fit into one of the categories above, their expenses do not qualify for the credit. If the person for whom you paid the expenses DOES qualify and you have entered their expenses in both sections (discussed above), verify that you have entered the dependent information (i.e. birthday, indicated disabled, etc.) correctly. For example: If the date of birth gets entered incorrectly indicating that the child is over 13 years old, this would indicate during the calculations that this person does not qualify and you would not receive the credit.
Do both spouses have earned income?
To receive the credit for Child and Dependent Care Expenses, the expenses had to have been paid for care to be provided so that you (and your spouse, if filing jointly) could work or look for work. If both spouses do not show "earned income" (W-2's, business income, etc.), you generally cannot claim the credit. However, if one spouse was a student or was disabled, you may still be eligible for the credit. If one of these two exceptions may apply, click here for more information. If you both have earned income and the credit is not calculating, check the appropriate income entry (W-2, Schedule C, etc.) and be sure that the income is indicated as being for the correct person (Taxpayer or Spouse). For example, if you and your spouse have W-2s, but it was indicated accidentally that both W-2s were for the Taxpayer on the account, this would reflect that the Spouse did NOT have income. Because it was not listed that the Spouse had a W-2, the information entered in the account would reflect that only one spouse had earned income. Because both spouses are not shown as having income, the credit would not calculate.
Is your filing status "Married Filing Separately"?
Prior to 2018, if you filed as Married Filing Separately, you do not qualify for the credit. If you are considered "married" at the end of the year and do not qualify to file as Head of Household, you must file your return as Married Filing Jointly to receive this particular credit. Per the IRS instructions: *Note: "You can take the credit if...your filing status is single, head of household, qualifying widow(er), or married filing jointly."
Beginning in 2018, if you are married filing separate and meet certain requirements, you can claim the Child Care Credit. You are able to claim the credit if:
- You lived apart from your spouse during the last 6 months of 2018.
- Your home was the qualifying person's main home for more than half of 2018.
- You paid for more than half of the cost of keeping up that home for 2018.
Do you have a tax liability?
The credit for Child and Dependent Care Expenses is a nonrefundable credit. Nonrefundable credits can only be claimed to reduce the amount of tax you owe based on your taxable income. When you calculate your return, look at line 15. If there is a "0" here for tax owed, you are not eligible to take the credit. If you do not have a tax liability and there is nothing to reduce, you cannot report a nonrefundable credit.
If there is an amount listed on line 15, also check line 12a. You may be receiving the Child Tax Credit instead. If the Child Tax Credit eliminates the tax listed on line 15, you would not be eligible to take the credit for Child and Dependent Care Expenses. Taking the Child Tax Credit (rather than the credit for Child and Dependent Care Expenses) to eliminate your tax liability is generally is to your benefit. Generally, you can receive $1,000 in Child Tax Credit per qualifying dependent. If this eliminates your tax liability, anything leftover can many times be claimed as a refundable credit on line 17 as "Additional Child Tax Credit".
Example: Based on his taxable income (line 6 of Form 1040), Mr. Smith has a tax liability of $1,100. He has 2 qualifying dependents and is eligible for $2,000 in Child Tax Credit. He is also eligible for, based on the expenses he paid for child care, $1,200 in credit for Child and Dependent Care Expenses. If he takes the credit for Child and Dependent Care Expenses (a nonrefundable credit), he can only claim $1,100 (to eliminate his tax liability) of the $1,200 that he is otherwise eligible for. Because it is a nonrefundable credit, this credit can only be as large as his tax liability. If he took the credit for Child and Dependent Care Expenses, he then would not be able to take the Child Tax Credit.
If he takes the Child Tax Credit instead, he can claim $1,100 (of the $2,000 that he is eligible for) as Child Tax Credit (nonrefundable) to eliminate the amount of tax he is liable for. However, unlike the credit for Child and Dependent Care Expenses, he can also receive the remaining $900 as Additional Child Tax Credit (refundable credit) on line 65. It is to his benefit to use the Child Tax Credit rather than his credit for Child and Dependent Care Expenses, because he eliminates his tax liability and receives an additional amount as a refundable credit.
For additional information pertaining to the Child and Dependent Care Expenses, please click here.
This article is intended for users who are attempting to take the Credit for Dependent Care Expenses, but it does not appear to be calculating on their return. If you did not pay for child care expenses, no credit should be calculating.