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Level 2
posted Feb 3, 2025 7:09:18 PM

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?

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

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1 Best answer
Level 15
Feb 3, 2025 10:33:26 PM

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.  

4 Replies
Expert Alumni
Feb 3, 2025 7:36:57 PM

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).

Level 2
Feb 3, 2025 10:21:40 PM

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.   

Level 15
Feb 3, 2025 10:33:26 PM

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.  

Level 2
Feb 3, 2025 11:01:46 PM

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