Divorced Client with Childcare Expenses

[Yardley CPA]

New client who divorced during 2014.  Child was in daycare center for which the client provided their EIN, Name and Address.  Childcare payments were paid for by the client ($3,000) and exspouse ($7,000).  These payments were made while couple was still married but the exspouse paid his share of expenses from his business account.  Can client claim the full $10,000 in expense on 2441?  She has indicated that exspouse would allow this and he is not claiming any childcare expenses.  Thoughts please?

[Janitor Bob]

Assuming that client is claiming the child as dependent, I'd say yes she can claim it all.  However, I think there is a $3,000/child max so your point may be mute

[easytax]

How many kids?  Who is taking dependency exemption?     We are assuming your client worked, paid for cost of own place, and needed the daycare and that the child was under required age, etc..

 

Basically if they were married then the money was paid by both (jointly) regardless of who wrote check (as long as they agree here - which you say they do). If just one kid the most you can use anyway is $3,000 and your client paid that alone.

 

Also remember to get the 8332 if your client is taking dependency and is not the custodial parent.   Additionally most credits, exemptions can not be "split" -- usually all or none.

 

Divorces can be agreeable now BUT always need to have "the paper work" in place in case someone gets upset later.

[mcb39]

Since the credit is based on the AGI of the taxpayer; I would say that the answer is no.

[SaraEA]

Only the custodial parent gets to claim the child care credit.  This is true even if he or she does not claim the exemption for the child. This is one area where IRS rules actually make sense. The custodial parent needs child care so s/he can go to work. The noncustodial parent can come and go as s/he pleases and doesn't need someone to watch the child while working.  And yes, the credit is based on a maximum of $3k for one child, $6k for two or more. AGI determines how much the credit is, ranging from 20-35% of the cost of care. So if the custodial parent makes over $43k, the most s/he will get is $600 credit no matter how much was spent. I know, where has Congress been? They increased the amount allowed for each child to $3k in 2001 (before that it was $2400). One cannot find good child care at those prices, or even horrible child care.

 

"the exspouse paid his share of expenses from his business account."  Gotta love it. Can't imagine what expense he charged it to. Be glad you aren't doing his taxes.