Is the adjusted gross income percentage for dependent care credit eligibility based on the combined income of those married filing jointly?

by Loretta M. Tubiello-Harr, CPA | May 01, 2019

The dependent care credit is based on adjusted gross income (AGI). If AGI is over $15,000, then a certain percentage can be calculated for qualifying expenses. If married filing a joint return, is this percentage based on combined income?

There is no AGI limit on who can claim the credit. The amount of AGI only determines the credit percentage. Therefore, combined income if married filing jointly is considered in determining the credit percentage allowed. The credit ranges from 20 percent to 35 percent, with a maximum credit of 20 percent of qualified expenses for taxpayers with AGI over $43,000.

Note a couple of other requirements: To take the credit for married filing jointly, both spouses must have earned income or the dependent care expenses are paid so the taxpayer and spouse could look for work; and, if married, generally the taxpayers must file a joint return.

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Answered by: Loretta M. Tubiello-Harr, CPA, is a principal with Tubiello-Harr & Associates LLC in Coopersburg, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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