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jgordosea
jgordosea, Enrolled Agent
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Experience:  I've prepared all types of taxes since 1987.
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DCRA v. Child and Dependant Care Credit. I have a dependant

Resolved Question:

DCRA v. Child and Dependant Care Credit. I have a dependant child that requires private duty nursing (special needs, chromosomal microdeletion and feeding tube). Although my child is eligible for TEFRA in SC, her condition is not severe enough to receive assistance for a nurse watch yet to severe for an aid or a child care facility to watch her. We are on pace to spend ~$13,000 this year in private duty nursing which only covers 2 days per week so that my wife can work and maintain insurance.

Can I put both $5k in a DCRA and claim the C&DC tax credit or is it one or the other? Total household income is >$100k.
Submitted: 8 months ago.
Category: Tax
Expert:  Megan C replied 8 months ago.

Megan C :

Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.

Megan C :

How are you today?

Megan C :

I'm sorry to hear about your child. I hope they are feeling well today.

Megan C :

What you are describing would not be a dependent care expense ...this would be a medical expense.

Megan C :

As such, you would be able to deduct the total amount of medical costs that you incur that exceed 7.5% of your income.

Megan C :

Or, you could put the funds in a healthcare expense reimbursement account.

Megan C :

If you do that, you cannot deduct what is paid for out of the healthcare reimbursement account...since that money is tax free.

Megan C :

That information is for medical expensews

Megan C :

However, the DCRA does allow you to pay for care provided by an in-home nurse or nursing assistant.

Megan C :

A list of eligible and ineligible expenses would be found, HERE

Megan C :

You can't double dip and use the funds from the dependent care reimbursement account for the Child and Dependent care tax credit

Megan C :

You can read an article about this, HERE

Megan C :

Is there anything else that I can assist you with today?

Megan C :

If not, please rate as "excellent" so that I may receive credit for assisting you todya

Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12234
Experience: Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
Megan C and 5 other Tax Specialists are ready to help you
Expert:  jgordosea replied 8 months ago.

Greetings,

 

Another expert here.

 

Can I put both $5k in a DCRA and claim the C&DC tax credit or is it one or the other?

No, you can not exclude the $5,000 of benefits and also claim a credit, regardless of income or amount spent on child care for one child.

 

See the Form 2441 at http://www.irs.gov/pub/irs-pdf/f2441.pdf

 

Line 29 of the form limits the amount for credit to $3,000 for one child (or $6,000 for two children) less the smallest amount of (1)the amount of care paid for,(2) earned income for the year and (3)$5,000.

 

If you have pretax dependent care benefits you received of $5,000 there is no allowable child care credit for one child (and only up to $1,000 for two children)

The care may potentially be allowed as a medical expense, as mentioned.

 

Please let me know if you need clarification.

Thank you.

jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3000
Experience: I've prepared all types of taxes since 1987.
jgordosea and 5 other Tax Specialists are ready to help you
Customer: replied 8 months ago.

So....


 


If I know that:


1) My 19 month old with TEFRA will be watched 16 hours/week @ $15/hr by a private duty nurse ($12,480) because of her feeding tube and chromosomal microdeletion. She will not be accepted at any daycare and isn't "Sick" enough to qualify for any care services that would allow my wife to go to work.


2) My wife works those 16 hours/week to maintain benefits and our household income is >$100k.


3) We do have a W-10 filled out by the nurse that watches our daughter.


4) We will have other medical expenses to claim, ranging from surgeries, mileage, copays and deductible payments.



Should I:


A) Put $5000 into the DCRA and then the remaining $7,480 in care costs can go against our itemized medical expenses?


B) Just put all $12,480 against medical expenses?


C) Put $3,000 against CD&C and the remaining $9,480 against our itemized medical expenses.

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