2441 Childcare exceptions?

[GradyFinance]

I have a client family, filing married/joint with 2 dependent children. Youngest child is <1 yr old, born with transposed arteries in heart. Child had open heart surgery at 1 day old. Social Security has placed child on disability/SSI until some point in time. Mother does not work but sends older child (3 yrs old) to daycare due to caring for cardiac baby. SSA told her she could claim childcare credit since younger child was disabled and required full time care. Nothing that I can find alludes to this. Anybody heard anything like this before? Thanks

[ATSMAN]

No never head of that exception. The exception that I have used once is:

Rule for student-spouse or spouse not able to care for self.
Your spouse is treated as having earned income for any month that he or she is:
1. A full-time student, or
2. Physically or mentally not able to care for himself or herself. (Your spouse also must live with you for more
than half the year.)

In my client's situation, wife was recovering from chemotherapy and had some other medical issues that was preventing her from providing childcare to her three kids. We did document it with a doctor's note.

[Koss]

Disabled Child

Is the taxpayer receiving payments from the county or the state as compensation for providing care to the disabled baby?

I am not referring to social security/disability/SSI. I am referring to a completely different concept here.

A severely disabled person who needs round-the-clock care sometimes qualifies for state or county assistance to pay for a home health care provider. And in some cases, the parent, or an adult child or sibling, can take on the role of that provider, and get paid by the county or state for providing that care.

So instead of going to work and using county funds to pay a home care assistant to care for your disabled child, you quit working, care for the disabled child, and you get paid by the county for providing that care.

If that's what is happening here, then the taxpayer may have earned income. In other words, she is actually working. Her job is to care for the disabled baby. She can't do that job and care for the other kid. So the other kid is in day care so mom can work. Her job is caring for the disabled baby.

BMK

[gmama]

Medicaid Waiver Program

Koss is probably referring to a Medicaid Waiver Program. They go by different names in different states. Here in CA, they are In-Home Supportive Services. And, yes, a parent can be hired to care for their severely disabled child in their own home. Per IRS Notice 2014-7, the income is not taxable [nor does it count for EIC, Child Tax Credit, etc]. However, the parent receiving the payment is employed and is thus eligible for child care credits.