Hello everyone,
I could use some help with a problem I’m facing trying to apply the dependent care credit. Let me explain my situation.
I have 2 young children. I am married and I’m filing a joint return. My wife who runs her own business has negative income this year, but I have positive income, enough income for us to qualify for the dependent care credit (making up for her loss). Through my employer, I had a $5000 FSA for dependent care. Because I had 2 children, from what I understand, I would qualify for the full dependent care credit ($6000 for 2 kids), minus what I had through my employer, meaning I should get to write off $1000.
When I attempt to access this credit, turbo tax asks if me or my wife were disabled for a full-time student which we are not. When I mark that, I am then told I do not qualify for the credit.
I tested to see if it was my wife having a negative income that disqualified us, and it looks like it is. If I adjusted my wife’s income to not be negative, it allowed us to write off a small percentage of our childcare costs.
This doesn’t seem right to me, though, because my wife and I are filing a joint return so I thought our income was considered combined. The IRS’s website even says you would qualify for the credit if your spouse was looking for work - which would mean they have no income.
Is this a glitch in Turbo tax’s system? Or do they really look at both spouse’s income individually for that specific credit regardless of filing a joint return?
