Child Care Credit

[dtlee]

In keeping with the message board debate about whether we should all be reading the code or whether or not the IRS is best in interpreting it, I pose the following question:

Can you claim child care expenses for a Qualifying Relative child and if so, until what age?

My initial reaction was "Not unless disabled" based on this from Form 2441:

Qualifying Person(s)
A qualifying person is:
• A qualifying child under age 13 whom you can claim as a dependent. If the child turned 13 during the year, the child is a qualifying person for the part of the year he or she was under age 13.
• Your disabled spouse who is not physically or mentally able to care for himself or herself.
• Any disabled person who is not physically or mentally able to care for himself or herself whom you can claim as a dependent (or could claim as a dependent except that the person had gross income of $3,400 or more or filed a joint return.)
• Any disabled person who is not physically or mentally able to care for himself or herself whom you could claim as a dependent except that you (or your spouse if filing a joint return), could be claimed as a dependent on another taxpayer’s 2007 return.

However, a quick perusal of the code describes this very differently:

§ 21(b)(1)
(A) a dependent of the taxpayer (as defined in section 152(a)(1) ) who has not attained age 13,
(B) a dependent of the taxpayer (as defined in section 152 , determined without regard to subsections (b)(1) , (b)(2) , and (d)(1)(B) ) who is physically or mentally incapable of caring for himself or herself and who has the same principal place of abode as the taxpayer for more than one-half of such taxable year, or
(C) the spouse of the taxpayer, if the spouse is physically or mentally incapable of caring for himself or herself and who has the same principal place of abode as the taxpayer for more than one-half of such taxable year.

There appears to be no specific rule that the dependent is disabled, although that is likely implied for someone of the age of a spouse. I would be fairly certain that a newborn is both physically and mentally unable to care for himself/herself regardless of any known or unknown disability.

It would seem that the age 13 limit would also not apply, although I am not going to suggest whether that means that the cutoff would be earlier or later for a Qualifying Relative who is not disabled.

I would appreciate your thoughts and positions on this. Thanks.

[Koss]

Qualifying Relative

I don't see an inconsistency between the language of Form 2441 and the language of the code.

The text that you cited from Form 2441 has four bullet points, but it can parsed into six catergories:

For the credit in question, a qualifying person is any one of the following:

(i) your qualifying child under age 13;
(ii) your disabled spouse
(iii) any other person who is disabled and who is your dependent;
(iv) any other person who is disabled and would be your dependent, if they didn't have more than $3400 in gross income;
(v) any other person who is disabled and would be your dependent, if they weren't married;
(vi) any other person who is disabled and would be your dependent, if you weren't prohibited from having any dependents due to the fact that you are someone else's dependent

I think you will agree that what I have written above is simply a paraphrase of the language on Form 2441. It's also consistent with IRC 21. My categories (iii) through (vi) have no age limit. The term dependent, as it is used on Form 2441, has its formal meaning: Qualifying Child or Qualifying Relative. IRC 152(a).

Your reading is correct. But I don't see how it conflicts with the instructions on Form 2441.

BMK

[Koss]

okay, wait a minute here...

- - - - - - - - -

[Koss]

Conflicting Instructions

Doug, you're right. The instructions for Form 2441 strongly imply that the credit is only available for:

- a qualifying child
- a disabled spouse
- a disabled dependent

So if you want to take the credit for a dependent that is not a qualifying child, the instructions for Form 2441 appear to be saying that the dependent must be disabled.

The code says nothing at all about the person being disabled; it refers only to the person being unable to care for themselves.

I think you found a typo in the instructions for Form 2441.

The discussion in Publication 17 supports your interpretation of the code. Here's the text, from the very bottom of page 209:

Qualifying Person Test

Your child and dependent care expenses must be for the care of one or more qualifying persons.

A qualifying person is:

1. Your qualifying child who is your dependent and who was under age 13 when the care was provided (but see Note later),

2. Your spouse who was physically or mentally not able to care for himself or herself and lived with you for more than half the year, or

3. A person who was physically or mentally not able to care for himself or herself, lived with you for more than half the year, and either:

a. Was your dependent, or

b. Would have been your dependent except that:

i. He or she received gross income of $3,400 or more,

ii. He or she filed a joint return, or

iii. You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2007 return.

There does appear to be a buried implication that a child 13 and over is able to care for himself, at least as this phrase is used in IRC 21, unless there is something wrong with the child. But neither the code nor Pub. 17 uses the term disabled. As I look at this more closely, it is fairly clear that we are not dealing with the same definition of disabled that allows an adult to be a qualifying child instead of a qualifying relative. Remember how you can get EIC for your 30-year old brother if he's really, really disabled and all the other criteria are met? It's the age test for a qualifying child. Under 19, or under 24 if a full time student, or any age if permanently and totally disabled.

There's a formal definition of permanently and totally disabled, and it's not applicable to the Child and Dependent Care Credit.

Pub. 17 actually has a definition that appears on page 210, that is applicable for purposes of the Child and Dependent Care Credit:

Physically or mentally not able to care for oneself. Persons who cannot dress, clean, or feed themselves because of physical or mental problems are considered not able to care for themselves. Also, persons who must have constant attention to prevent them from injuring themselves or others are considered not able to care for themselves.

This is not what is meant by "permanently and totally disabled."

Page 210 also defines dependent in the context of the Child and Dependent Care Credit:

Dependent defined. A dependent is a person, other than you or your spouse, for whom you can claim an exemption. To be your dependent, a person must be your qualifying child (or your qualifying relative).

This is in fact the definition in IRC 151, and it makes it pretty clear that a child who is your qualifying relative can in fact be a qualifying person for the Child Care Credit, even if the child is not "disabled."

Reading this stuff carefully for the ninth time, it is equally clear that a child 13 and over is presumed to be able to care for himself.

So the text of the instructions for 2441 was badly written. And even the Pub. 17 is a bit confusing. To the unsuspecting reader, it might seem like the credit is not available for a qualifying child over 13 even if the kid is disabled, because the first part says that a qualifying child must be under 13. But the latter portion is not limited in scope to qualifying relatives. The latter portion discusses the applicability of the credit to any dependent unable to care for themselves, regardless of age. A dependent can be a qualifying child OR a qualifying relative.

Burton M. Koss
koss@usakoss.net

[Koss]

Conflicting Instructions

Doug, you're right. The instructions for Form 2441 strongly imply that the credit is only available for:

- a qualifying child
- a disabled spouse
- a disabled dependent

So if you want to take the credit for a dependent that is not a qualifying child, the instructions for Form 2441 appear to be saying that the dependent must be disabled.

The code says nothing at all about the person being disabled; it refers only to the person being unable to care for themselves.

I think you found a typo in the instructions for Form 2441.

The discussion in Publication 17 supports your interpretation of the code. Here's the text, from the very bottom of page 209:

Qualifying Person Test

Your child and dependent care expenses must be for the care of one or more qualifying persons.

A qualifying person is:

1. Your qualifying child who is your dependent and who was under age 13 when the care was provided (but see Note later),

2. Your spouse who was physically or mentally not able to care for himself or herself and lived with you for more than half the year, or

3. A person who was physically or mentally not able to care for himself or herself, lived with you for more than half the year, and either:

a. Was your dependent, or

b. Would have been your dependent except that:

i. He or she received gross income of $3,400 or more,

ii. He or she filed a joint return, or

iii. You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2007 return.

There does appear to be a buried implication that a child 13 and over is able to care for himself, at least as this phrase is used in IRC 21, unless there is something wrong with the child. But neither the code nor Pub. 17 use the term disabled. As I look at this more closely, it is fairly clear that we are not dealing with the same definition of disabled that allows an adult to be a qualifying child instead of a qualifying relative. Remember how you can get EIC for your 30-year old brother if he's really, really disabled and all the other criteria are met? It's the age test for qualifying child. Under 19, or under 24 if a full time student, or any age if permanently and totally disabled.

Pub. 17 actually has a definition of that appears on page 210, that is applicable for purposes of the Child and Dependent Care Credit:

Physically or mentally not able to care for oneself. Persons who cannot dress, clean, or feed themselves because of physical or mental problems are considered not able to care for themselves. Also, persons who must have constant attention to prevent them from injuring themselves or others are considered not able to care for themselves.

This is not what is meant by "permanently and totally disabled."

Page 210 also defines dependent in the context of the Child and Dependent Care Credit:

Dependent defined. A dependent is a person, other than you or your spouse, for whom you can claim an exemption. To be your dependent, a person must be your qualifying child (or your qualifying relative).

This is in fact the definition in IRC 151, and it makes it pretty clear that a child who is your qualifying relative can in fact be a qualifying person for the Child Care Credit, even if the child is not "disabled."

Reading this stuff carefully for the ninth time, it is equally clear that a child 13 and over is presumed to be able to care for himself.

So the text of the instructions for 2441 was badly written. And even the Pub. 17 is a bit confusing. To the unsuspecting reader, it might seem like the credit is not available for a qualifying child over 13 even if the kid is disabled, because the first part says that a qualifying child must be under 13. But the latter portion is not limited in scope to qualifying relatives. The latter portion discusses the applicability of the credit to any dependent unable to care for themselves, regardless of age. A dependent can be a qualifying child OR a qualifying relative.

Burton M. Koss
koss@usakoss.net

[dtlee]

Thank you for confirming my suspicions

Thanks, Burton

So, as I read it now, the rules are that for a Qualifying Child or a Qualifying Relative, you can take the Child Care Credit for as long as the child is unable to care for himself/herself (by some vague definition that I will not attempt to document here) but for a Qualifying Child, you can continue to take the Child Care Credit up to the age of 13 even if the dependent is somehow able to care for himself/herself (by the same vague definition).

Like I said in the original post, it is unclear to me whether the ability to care for oneself would occur before or after the age of 13, but, as you point out, this is definitely not the "totally and permanently disabled rule."

The definition you cite from page 210 of Publication 17 is close, but I do not know if the word "problems" is accurate in this context. If I replaced that with "limitations" I think it would be a closer guideline for this scenario. However, I have seen a three year old put on clothes, put cereal and milk in a bowl, and brush their teeth. Maybe the constant attention portion to prevent a them from injuring themselves is the portion that is more pertinent for a child. Of course, even if those guidelines were used, they remain vague.

I would think there is some validity to following the rules for the age limits for a Qualifying Child for a similar Qualifying Relative as well but I am not sure that this is correct.

The way I phrased it above was deliberately to say that even if the child is able to care for himself/herself, the credit is allowed up to age 13. If that is the interpretation, then the law is very clear that this rule only applies to Qualifying Children. Of course then I would create the scenario of the fraternal twins with two different fathers who both live with one of the fathers...