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Dear Tax Talk,
We have a newborn who needs constant home nursing care due to a tracheotomy. We normally would put the child in daycare right now, but can’t. Are any of our expenses (nursing care, medical supplies, etc.) deductible in terms of the child care credit? The nurse basically acts as a nanny so my wife and I can work. I know medical expenses have to be beyond 7.5 percent of income to be deducted, but can any of these expenses be seen as child care?
Taxpayers can receive a credit (usually 20 percent) of up to $3,000 of a dependent’s child care expenses. Child and dependent care expenses must be work-related to qualify for the credit. Expenses are considered work-related only if both of the following are true: They allow you (and your spouse if you are married) to work or look for work, and they are for your dependent’s care.
Some expenses for the care of your child may qualify as work-related expenses and also as medical expenses. You can use them either way, but you cannot use the same expenses to claim both a credit and a medical expense deduction.
If you use these expenses to figure the credit and they are more than the earned income limit or the dollar limit of eligible expenses, you can add the excess to your medical expenses. Hence the nursing care can qualify as child care expenses but the medical supplies cannot.
The medical supplies would strictly be medical expenses. If the nurse performs basic household duties such as cleaning and laundry, all of her costs would still be considered for child care. You can also include the value of meals provided to the nurse.
Use Form 2441 for calculating the child care credit.
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.