Q. Are any tax advantages to me for signing up for dependent care benefits in 2009 for my son, who will be 14 in November 2008?
A. Here is how I read the tax law in this situation -
To qualify for a tax benefit for child and dependent care expenses, the expenses incurred must be for the care of a “qualifying person”. A qualifying person includes your qualifying child who is your dependent and who was under age 13 when the care was provided, or a person who was physically or mentally not able to care for himself or herself, lived with you for more than half the year, and was your dependent.
You may be able to exclude from taxable income amounts your employer paid directly to either you or your care provider for the care of your qualifying person while you work.
When completing Part III of the Form 2441 you are asked to enter on Line 18 the “qualified expenses incurred in year XXXX for the care of the qualified person(s)”. Payments made for a child who is age 13 or older (and not disabled) when the care was provided are not qualified expenses for the care of a qualified person, as the child is not a “qualified person” due to the age.
Therefore the amount that would be entered on Line 18 would be “0” – and “0” of dependent care benefits would be excluded from taxable income. Any dependent care benefits paid through an employer plan would be includible in taxable wages.
The only way that a dependent child age 13 or older would qualify for a tax benefit from dependent care expenses is if the child was physically or mentally not able to care for himself or herself.
I would expect that the employer Dependent Care Benefit plan would be written such that it would not provide benefits for a dependent who would not qualify for the tax credit.
For more information check out IRS Publication 503.
Readers – as with any answer, advice or information I provide here at THE WANDERING TAX PRO, if you think I am wrong, or have made a error, or have a different interpretation of the tax law in question please let me know by posting a comment.