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I have a W2 and my wife has business income (K1). TT says we are not qualified for dependent (parent) care credit because both need to have EI. Isn't business income EI?

I have dependent care expenses for a parent for which I would like to take tax credit.  I have a W2 and my wife has business income (K1). TurboTax says we are not qualified for dependent care credit because both, me and my wife, need to have earned income. Isn't business income considered earned income? If yes, then what could be the reason for TT to not let me take that tax credit?
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1 Reply
MinhT1
Employee Tax Expert

I have a W2 and my wife has business income (K1). TT says we are not qualified for dependent (parent) care credit because both need to have EI. Isn't business income EI?

Income reported on a Schedule K-1 isn't earned income for the Child and Dependent Care Credit.

 

Please see the definition of earned income on page 4 of this IRS document.

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