To claim the Child and Dependent Care Credit, both spouses generally must have earned income if you're filing a joint return. However, the IRS provides an exception when you or your spouse was a full-time student or physically or mentally incapable of self-care during part of the year.
This exception allows certain taxpayers to qualify for the credit even if one spouse didn't have earned income from a job or self-employment.
Who Qualifies for the Exception?
Full-Time Student
You (or your spouse) are considered a full-time student if you were enrolled as a full-time student at a qualifying school during part of at least five calendar months during the year.
Keep in mind:
- The five months don't have to be consecutive.
- A qualifying school includes most traditional schools, colleges, universities, and technical schools.
- On-the-job training programs, correspondence schools, and schools that offer courses only through the internet generally don't qualify for this exception.
Disabled or Incapable of Self-Care
You (or your spouse) are considered disabled for purposes of this credit if you were physically or mentally incapable of caring for yourself.
This exception applies only for purposes of calculating the Child and Dependent Care Credit and has special earned income rules.
How Is Earned Income Calculated Under the Exception?
If you or your spouse qualified as a full-time student or disabled for any month during the year, the IRS treats that person as having earned income for purposes of calculating the credit.
For each month or partial month that the exception applies, the IRS assumes earned income of:
- $250 per month if care was provided for one qualifying individual
- $500 per month if care was provided for two or more qualifying individuals
To determine the deemed earned income:
- Count the number of qualifying months.
- Multiply the number of months by:
- $250 for one qualifying person, or
- $500 for two or more qualifying persons.
The result is used as earned income solely for calculating the Child and Dependent Care Credit.
Example
If your spouse was a full-time student for five qualifying months and you had two qualifying children receiving care:
- 5 months × $500 = $2,500
For Child and Dependent Care Credit purposes, your spouse is treated as having $2,500 of earned income.
What If Both Spouses Are Full-Time Students or Disabled?
If both spouses qualify as a full-time student or are disabled during the same period:
- Both spouses may be treated as having deemed earned income under the IRS rules.
- The Child and Dependent Care Credit calculation is still subject to the earned income limitations and other requirements of Form 2441.
Our software automatically applies the appropriate calculation based on the information you enter and determines the allowable credit.
Community Property States
If you're filing a joint return, community property laws do not apply when determining earned income for the Child and Dependent Care Credit.
Instead, earned income is calculated using the special IRS rules for Form 2441, including any full-time student or disability exception that applies.
Entering Full-Time Student or Disability Information
When completing the Child and Dependent Care Credit section of your return, be sure to indicate whether you or your spouse:
- Attended school full-time during at least five qualifying months, or
- Were physically or mentally incapable of self-care during any part of the year.
Our software will use this information to apply the earned income exception automatically and calculate the maximum Child and Dependent Care Credit available to you.