I have w-2 income and my wife just began a position in Dec ‘17 (she will have a 1099 for 2017). Can we file for the childcare tax credit? We have 4 dependents under 10

[CORETAX9000]

My wife has been a stay at home mom all year and has no earned income to date. We have four young boys and have probably spent over $10,000 in child care expenses. My wife was just offered a position in December 2017 for part-time work as a contractor. She will have received earned income before the end of 2017. Can we claim the child care tax credit since both of us technically have income now?

[SweetieJean]

Only for the month of Drecember.

[CORETAX9000]

Why only December? What if my wife looked for a job during other months of the year?

[SweetieJean]

You did not say she had been looking for work. You described her as a Stay at Home Mom.

[Opus 17 · Accepted solution]

There are two issues.

Your expenses are "qualified expenses" for any month where you and your spouse both worked or looked for work.  The allowable credit is $500 per month for each month she worked or looked for work.

However, the maximum expense allowed is the amount of money she actually reports as taxable income for the year.

This creates some interesting situations because the tax form does not break things down month by month, you are on the honor system to do that.  Suppose she is paid $6000 in December, but was only "looking for work" for 4 months.  That means that only $2000 of your expenses are qualified.  But the form only asks for the amount of qualified expenses and her income, it doesn't break it down by month.  So you could enter $6000 of qualified expenses and get the full credit, and the IRS wouldn't know it was wrong unless they audited you.  On the other hand, if she was looking for work for all 12 months, but is only paid $2000 in 2017, then all your expenses are "qualified" but your maximum credit is still only $2000.

[CORETAX9000]

Thank you for the detailed explanation and breakdown. Very helpful.

[SweetieJean]

"part-time work as a contractor" Be sure she claims any contractor-related expenses.