My spouse worked 32.5hrs per week (considered full time) last year. Her wages weren't even enough to cover our family medical expenses. now we cant deduct child care?

[seanamy2009]

Because her net income, your program is assuming she wasn't working or was a student or disabled.  Neither were the case. We paid $2430 in childcare but its only allowing us to claim $240.

[MichaelL1]

Double check the W-2 entry and make sure it is listed as your wife's income and not yours and post a comment and let me know.

[seanamy2009]

Yes, it is entered correctly as my wife's income.

[Texas Roger]

Both of you must have income from working. If you both had W-2s are both W-2s assigned correctly?

[seanamy2009]

the problem is that our health insurance was more than her income so it doesn't show a net income.  I wouldn't think paying more for health insurance that what your wages are would keep you from claiming childcare expenses.  Makes no sense.

[Texas Roger]

Yes you must have an amount in box 1 of the W-2 to have earned income entered on your tax return.

[seanamy2009]

There is income showing in box 1.  $239.89

[seanamy2009]

Is anyone still looking into this?

[Texas Roger]

I have no answers. Try contacting TorboTax directly.

[VolvoGirl]

239 is the total for last year?  Did she just start working in December?  Or how come box 1 is so low?  Did the health ins come out of her pay?

[Opus 17]

If someone's gross salary was $1000 per month but health insurance premiums are $990, they would be deducted pre-tax and the box 1 wage would only be the net $10 per month.  (It's an unfortunate situation, one spouse working only for health insurance and the other spouse working for everything else.  You might want to find some kind of health care navigator or expert to help you figure out if this is the best way to provide health insurance for your family.)

I don't remember whether health insurance premiums are also pre-FICA, the spouse might have a large box 3 and box 5 income.  But, while that counts as earned income for some purposes, it doesn't seem to count for the child and dependent care credit.

[Opus 17 · Accepted solution]

If the box 1 wages are $240, then that will be the maximum amount of the child and dependent care credit.  It's the correct calculation per form 2441.  There is no error in Turbotax.

Your situation is unfortunate but I don't know of any work-arounds.  For 2017, if her job situation remains the same (minimal box 1 income), then you might get more dependent care benefit if you could take out a $2500 FSA at your workplace and then file married filing separately.  But it may be too late to enroll in an FSA at your workplace.

You might try married filing separately this year as well.  You would be ineligible for any credit (you lose the $240) but this might be one case where you would save in other places.  You could test it before making a final decision.

If she had any other income that you haven't declared (selling things on eBay, or side jobs babysitting and such) then if you upgraded to the self-employed version and created a schedule C to report the income, the higher income would support a higher credit.  (Or course, the higher income would also be taxed, so it might not end up to your benefit.)

A tax professional (accountant who is an enrolled agent) might have other suggestions, but the calculation is correct per the form.