Turbotax says we are ineligible for the child tax credit. They're under 13, we're filing jointly, she had earned income (<$6000) and was looking for work in 2025. Why?

[prestonbroderick]

Its very unclear to me why we're being denied, even after reviewing official tax rules from the IRS. We spent well over 30,000 last year on dependent care at qualifying organizations. We meet the criteria. My wife is starting a business and had earned income last year, but not $6000 worth (which turbotax is saying she needs....why?)

[xmasbaby0]

Are you confusing the child care credit with the child tax credit?   In order to use the childcare credit---the one for paying someone to take care of your child so you can work----you can be looking for work--but the catch is you have to actually find a job and begin working or you do not get the childcare credit.   Or---if you are self-employed and show a loss, you will not get the credit.   

https://ttlc.intuit.com/turbotax-support/en-us/help-article/taxation/child-dependent-care-credit/L8h...

[DoninGA]

Assume you referring to the Child and Dependent Care credit, not the Child Tax Credit, totally different type of credit.

For the Child and Dependent Cared Credit, both of you must have earned income to be eligible for the credit.  Did you have earned income in 2024 and if so, have you entered that income in the TurboTax program?

[SusanY1]

Was your wife's only income this year from her new business?  If so, check to be sure she has net profit in that business, or it won't count as her having "earned income" for purposes of the dependent care credit.  If she has more expenses than she had income, showing a loss or a $0, then you won't be eligible for this credit this year.  

Return to the Income section and look at the 2024 column for "Business Income and Expenses (Sch C)".

 

[prestonbroderick]

apologies, yes its the child & dependent care credit, not the child tax credit. 

To answer the other questions...

* I haven't entered any business expenses at all for my wife, so she is showing a net gain of around $2000

* I have earned income, higher than $6000

* Turbotax is saying we are not eligible because my wife did not make $6000 in earned income. 

[SusanY1]

Thank you for that clarification.  There is a limit on expense of $6,000 per child, but there is not a $6,000 requirement for the income.  I'd like to take a closer look at this in your case.

To let me do that, I need a diagnostic file which is a copy of your tax return that has all of your personal information removed. You can send one to us by following the directions below:

TurboTax Online:

1. Sign into your online account.
2. Locate the Tax Tools on the left-hand side of the screen.
3. A drop-down will appear. Select Tools
4. On the pop-up screen, click on “Share my file with agent.”
5. This will generate a message that a diagnostic file gets sanitized and transmitted to us.
6. Please provide the Token Number that was generated in the response.

TurboTax Desktop/Download Versions:

1. Open your return.
2. Click the Online tab in the black bar across the top of TurboTax and select “Send Tax File to Agent” *
3. This will generate a message that a diagnostic copy will be created.  Click on OK and the tax file will be sanitized and transmitted to us.
4. Please provide the Token Number (including the dash) that was generated in the response.

*(If using a MAC, go to the menu at the top of the screen, select Help, then, “Send Tax File to Agent”)

If possible, please post a screenshot with the number to avoid deletion by our privacy filters which sometimes delete or shorten these numbers.

[VolvoGirl]

Make sure her Schedule C is assigned to her and not you.   And all your income W2 is assigned to you.  

And to count as earned income, for Schedule C it is Net Profit reduced by 1/2 of the SE tax.

[prestonbroderick]

What I see in the app...

After I hit submit...

Here is the token code, ty!

[SusanY1]

I have found the entry that is causing the problem.  

In the section for your wife's business, the question "Did you play an active role in this business?" is marked "no".  Return to the section for Business Income and click edit.  Continue 4 or 5 screens in and look for this question (I pasted a screenshot of what it looks like below, for reference).

Change the "no" to "yes" and then click Continue (answering questions where required noting that some will require re-validation) until you get to the end.  

Once you've done this, return to the dependent care section again. 

You'll see it will ask a few more this time than it did initially, and at the end it should present you with a credit. 

[prestonbroderick]

Thanks for catching that. Unfortunately I still get the same error message about the $6000 and not receiving the credit after running through it again, even on a new browser / incognito session. 

I don't necessarily want to, but is there a way to wipe both the income from kristin and the child dependent credit and start fresh on just those sections? 

[IsabellaG]

Yes, you can go back to those sections and delete your entries, but you will also need to delete the forms you created in your return when you made those entries. See this Help Article for how to view and delete forms in TurboTax Online. 

The forms you are looking for are Schedule C and Form 2441, and any related worksheets that you see in your return. Then you can go back and re-enter this information, starting with your wife's business.