Child Care Tax Credit- Not for everyone

Not everyone has the ability to receive the Child care tax credit. Your website states " Work-related child care costs are deducted at a rate of only 75%, thus taking into account the 25% federal tax credit for child care. “Work-related” daycare costs include not only those costs related to the parent’s working but also to the parent’s looking for work." However, if the individual pays trough payroll deduction with a Dependent Care Flexible spending account, they are not eligible for the Child Care Tax Credit. Additionally, for the status of Married filing separately, the parent is not eligible for the Child Care Tax Credit. I thought I read somewhere that only the tax credit actually received would be taken into consideration.
When medical insurance premiums are deducted from paychecks on a pre-tax basis, the entire amount is still put into the calculator. However, when the dependent care flexible spending account is deducted from a paycheck on a pre-tax basis as with my employer, the calculator is interested in the tax effects. When the scenario occurs that funds deducted from a paycheck on a pre-tax basis and placed into the dependent care flexible spending account, the parent is not eligible for the Child care tax credit on their income tax return. Will the court take this into consideration? Why are the tax breaks for the medical insurance on a pre-tax basis not taken into account?

Generally, for child support purposes, a judge does not look at tax effects when calculating and determining child support since the judge generally must use and apply the child support worksheet.

Anna Ayscue

Attorney with Rosen Law Firm Cary • Chapel Hill • Durham • Raleigh • Wake Forest

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