Why Don’t I Qualify for the Dependent Care Credit?
Eligibility for the Dependent Care Credit depends on specific, intersecting rules for your income type, the purpose of the care, and your filing status.
The Child and Dependent Care Credit helps offset the costs of care for a child or dependent, allowing individuals to work or look for employment. Disqualification often stems from a series of specific tests and rules from the Internal Revenue Service (IRS). Understanding these requirements is the first step in determining your eligibility, as the credit depends on meeting criteria for your dependent, income, expenses, and filing procedures.
The Qualifying Person Test
A requirement for the credit is that care expenses must be for a “qualifying person.” The most common qualifying person is a dependent child who was under the age of 13 when the care was provided. If a child turns 13 during the tax year, you can only claim expenses for the portion of the year before their birthday.
The test also applies to your spouse or another dependent of any age who is physically or mentally incapable of self-care and lived with you for more than half of the year. The IRS defines “incapable of self-care” as a condition where an individual cannot meet their own basic needs for hygiene, nutrition, or safety due to physical or mental limitations.
A person may also qualify if they are physically or mentally incapable of self-care and lived with you for more than half the year, but cannot be claimed as a dependent. This can occur if they had a gross income of $5,050 or more in 2024, filed a joint return, or could be claimed as a dependent by another taxpayer.
The Earned Income Test
The earned income test requires that you, and your spouse if filing a joint return, have earned income during the tax year. Earned income includes wages, salaries, tips, other taxable employee compensation, and net earnings from self-employment. Income that is not considered “earned” for this credit includes:
- Interest
- Dividends
- Pensions
- Social Security benefits
- Unemployment compensation
If one spouse in a married couple did not work and received no earned income, the couple generally cannot claim the credit. The credit is limited to the smaller of the two spouses’ earned incomes. For example, if one spouse earned $50,000 and the other earned only $2,000, the maximum amount of expenses you could use to calculate the credit would be capped at $2,000.
An exception exists for a spouse who was either a full-time student or was physically or mentally incapable of self-care. The IRS allows you to treat that spouse as having earned income for each month they were a student or disabled. This “deemed” income is $250 per month for one qualifying person, or $500 per month for two or more.
The Work-Related Expense Test
The expenses themselves must meet the work-related expense test, meaning you paid them so that you (and your spouse, if married) could work or actively look for work. If the care is for any other purpose, such as enrichment or general education, it does not qualify. The primary reason for the expense must be to ensure your dependent’s well-being and protection while you are at your job or searching for one.
Qualifying expenses are for your dependent’s well-being and protection while you are working. Eligible costs can include:
- Daycare centers
- Nursery schools
- Babysitters
- Before- or after-school programs
The cost of a day camp during the summer also qualifies, but the cost of overnight camps does not. Tuition for kindergarten and higher grades is an educational expense and is not eligible.
Confusion often arises with activities that blend care with instruction. Specialized lessons for music or sports do not count toward the credit. If a summer camp offers a mix of care and educational activities, only the portion attributable to care is eligible. You cannot claim expenses for tutoring or summer school programs.
Filing and Provider Identification Rules
There are also administrative rules that must be followed. If you are married, you must file a joint tax return with your spouse to claim the credit. Filing as “married filing separately” will disqualify you from taking the credit, though there are narrow exceptions for individuals who are legally separated or living apart from their spouse.
You must also identify the person or organization that provided the care on your tax return using Form 2441, Child and Dependent Care Expenses. For each provider, you are required to report their name, address, and Taxpayer Identification Number (TIN), which is either a Social Security Number (SSN) for an individual or an Employer Identification Number (EIN) for a business.
Failure to provide this information can result in the denial of your credit. It is your responsibility to obtain this information from your care provider. The IRS provides Form W-10, Dependent Care Provider’s Identification and Certification, which you can give to your provider to request their TIN. If a provider refuses, you must be able to demonstrate that you exercised “due diligence” in trying to obtain it.