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Why do we not qualify for child care credit?
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Why do we not qualify for child care credit?
Unfortunately, income from a Schedule K-1 (Form 1120S) doesn't count as earned income because the K-1 income is not considered income from self-employment (because you do not pay self-employment tax on the S-Corp income).
S-Corporation owners only make earned income if the S-Corp pays the owner income through a W-2.
See the following from IRS Publication 503:
To claim the credit, you (and your spouse if filing jointly) must have earned income during the year.
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Why do we not qualify for child care credit?
Unfortunately, income from a Schedule K-1 (Form 1120S) doesn't count as earned income because the K-1 income is not considered income from self-employment (because you do not pay self-employment tax on the S-Corp income).
S-Corporation owners only make earned income if the S-Corp pays the owner income through a W-2.
See the following from IRS Publication 503:
To claim the credit, you (and your spouse if filing jointly) must have earned income during the year.