Dependent care payments by self-employed taxpayer

[appelman]

Can a self-employed taxpayer who must pay for dependent care in order to do his work deduct the cost as a business expense, instead of claiming a dependent care credit?

[FEDUKE404]

Very unlikely a valid business expense

Can a self-employed taxpayer who must pay for dependent care in order to do his work deduct the cost as a business expense, instead of claiming a dependent care credit?

Well, I would think to so do on Sch C would require such expenses to be a "reasonable and necessary" cost of business.

The question is not really that much different from asking if an employee can deduct similar dependent care expenses, via Form 2106 ?, on a Schedule A.

Your use of "must" might bear some further explanation?

Otherwise, I doubt if that dog will even yip, much less hunt.

FE

[ChEAr$]

And furthermore, proprietor must "show a profit" for the year.
For the record, I've always hated that term. The connotations are obvious.

[appelman]

Profit is not a problem

The out-of-home work is only a portion of his business, and if the dependent care were non-deductible, it would be uneconomical to do that particular project, since the after-tax income that was generated would be less than the dependent care expense, so he would simply drop it. FEDUKE is right that you could ask a similar question for some employee situations. However, in that case the employer has the option of paying for dependent care up to 5K.

[Burke]

From research I can find, it appears there is no remedy for deduction of dependent care expenses under any facet of the tax law except the Dep Care Credit. It has been held it cannot be treated as a medical expense. On Wikipedia, it definitely says "courts have held" that it is not allowed as a business expense, or under 162a. There is a reference to Smith vs Commissioner, 113F 2d, which was a case heard in 1940. I cannot bring it up, but I am sure it was just regarding personal expenses deducted on a business, since the DCC did not exist then.

[appelman]

Thanks.

That sounds pretty conclusive!

[taxea]

It is a personal item, not a business expense.