Credit for self-employed individuals with Childcare Expenses

[Maria]

Hello,

I have a question for California Form 3501. My client, husband and wife with two small children; the husband had W2 income. The wife is a self-employed individual and she had Sch C loss for 2008. They had paid some childcare expenses of about $3000 during 2008. My question is, can they claim a credit on form 3501? I read through the instruction and it seems it doesn't tell if they were eligible with business loss.

Thank you very much.

[OtisMozzetti]

No earned income, no childcare credit

Hello,

I have a question for California Form 3501. My client, husband and wife with two small children; the husband had W2 income. The wife is a self-employed individual and she had Sch C loss for 2008. They had paid some childcare expenses of about $3000 during 2008. My question is, can they claim a credit on form 3501? I read through the instruction and it seems it doesn't tell if they were eligible with business loss.

Thank you very much.

The federal child and dependent care credit, and also its offshoot the California credit, limit the amount of expenses that can be utilized to the earned income (i.e. wages or net self-employment income), or deemed earned income, of the lower earning spouse.

There is no use engaging in any debate of what one or the other or us believes, or wants to benefit from arguing, that tax laws "should" be.

[Maria]

Thanks so much. Yes that makes sense!