@CougarsDen wrote:
Yet, employees can pay a discounted rate for their child to attend the care facility they work for and receive the dependent care credit.
A company is not a person. Furthermore, anything of value that an employer provides to an employee as compensation for their services must be considered taxable income, unless it falls under one of the statutory categories of workplace benefits. The value of the discount should probably be included as a workplace daycare benefit and reported in box 10 of their W-2, which results in the same treatment as a flexible spending account and is a tax-free benefit but reduces their ability to use the credit. Or the value of the discount is added to their box 1 taxable wages, and then they can take the credit, but it also increases their taxable income.
If you are an employer of other caregivers, you may want to review publication 15-B or speak to an accountant to determine if the discount you give to other employees should be included as a box 10 dependent care benefit on their W-2s.
https://www.irs.gov/pub/irs-pdf/p15b.pdf
You also can't take a tax credit for money that was never part of your income in the first place. Your "tax reduction" is that you don't have taxable income. You can't claim a credit off of income you never received. If you placed your child with a different caregiver so that you could fill that slot with a paying customer, then you could take the credit against whatever you paid that caregiver, but presumably it would not work out as well that way because you would have to pay more than the credit is worth.
In any case, the rule that a parent can't receive the credit for caring for their own child is specifically written into the tax law.
