Deductions & credits

If you receive a W-2, wage income, that should qualify.  But if the business is an 1120S and you don't take a salary, the ordinary income distribution on the 1120S K-1 does not qualify as earned income.  Same for a partnership unless the income from the partnership is in the boxes for SE income.

 

The problem might be that unless the spouse is either a student or receiving earned income, you wouldn't qualify for the child care credit.  It was meant to help out people who are working for earned income and/or students.  That was the original intent.

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