I made -6000 on a schedule C, and my wife made 120000. Isn't it true that my -6000 is still earned income? Do we qualify for the dependent care credit if filing jointly?

[hendlerman]

I think i said I was unemployed somewhere earlier, but I had a startup that couldn't get customers.

[DawnC]

Profits from Schedule C are considered earned income for purposes of the credit.  A net loss from self-employment reduces earned income.  Here are the the requirements for the Dependent Care Credit -

• You (and your spouse, if filing jointly) must have earned income.
  • The earned income requirement for one spouse is waived if they were a full-time student or disabled (if they lived with the other spouse for more than 6 months in 2024).
• You paid caregiving expenses so that you (and your spouse, if filing jointly) could work or look for work.
  • The work/look-for work requirement for one spouse is waived if they were a full-time student or disabled (if they lived with the other spouse for more than 6 months in 2024).
• You paid a caregiver to care for a Qualifying Person. The caregiver can't be:
  • Your spouse.
  • Your dependent.
  • Your child if they were under 19 on the last day of 2024, even if not your dependent.
  • The parent of the Qualifying Person, if the Qualifying Person is your child under the age of 13 during 2024.
• Your filing status is not Married Filing Separately (except under certain circumstances).
• You can provide the care provider's name, address, and their SSN, ITIN, or EIN on your return (unless it's a tax-exempt organization).

[hendlerman]

This confirmed my understanding. In the software, the 2260 worksheet shows a correct earned income. However, when asked about child care tax credit, when marking that neither of us were full time students or needing assistance ourselves, the software says I am not eligible.   

[VolvoGirl · Accepted solution]

If you have a 6,000 Loss on schedule C  you do not  have any  earned income.  You both need earned income to get the Child Care Credit.    Earned income is only W2 wages or a Net Profit on Schedule C.  

[hendlerman]

Thank you. I see https://www.irs.gov/taxtopics/tc602 states both spouses must have positive earned income