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Child and Dependent Care Expenses Credit - Important Reminders

To assist your clients and avoid processing delays, make sure they understand that ALL eight of the following qualifications must be met:

  1. Married or registered domestic partners (RDP) must file a joint return unless they meet the three requirements below:
    • They lived apart from their spouse/RDP at all times during the last six months of 2010.
    • The qualifying person(s) lived in their home more than half of 2010.
    • They provided over half the cost of keeping up their home.
  2. Care must be provided within California for one or more qualifying persons. See form FTB 3506, Section D, Qualifying Person Defined.
  3. The taxpayer paid for care for the qualifying child or qualifying person while he/she (and the spouse/RDP) worked or looked for work. However, if you did not find a job, and have no earned income, you do not qualify for the credit. If his/her spouse/RDP was a full time student or disabled see form FTB 3506 instructions for lines 5 and 20.
  4. The taxpayer (and his/her spouse/RDP) must have earned income during the year: wages, salary, tips, active duty pay, or net earnings from self-employment income. Earned income does not include pensions, social security payments, worker’s compensation, interest, dividends, capital gains, unemployment compensation, or public assistance.
  5. The taxpayer and the qualifying person(s) must have lived in the same home for more than half the year. If the qualifying person lived with more than one person during the year, see the tie-breaker rules on page 1 of the form FTB 3506 instructions. For parents who are divorced, separated or never-married or whose RDP terminated and both parents paid for child care, see the rules on pages 1 and 2 of the form FTB 3506 instructions.
  6. The person who provided the care cannot be the taxpayer’s spouse/RDP, the parent of the qualifying child, or a person for whom the taxpayer can claim a dependent exemption.
  7. All of the required information about the care provider(s) must be provided on form FTB 3506, including a complete physical address where the care was provided - street number, city, state, and zip code. A post office box is not acceptable. Incomplete information could delay or disallow the credit.
  8.  The taxpayer’s federal adjusted income must be $100,000 or less.

We will ask for proof of payment. Keeping accurate records will help meet the burden of proof. We may contact the care provider to verify the information provided.

Additionally, this credit is to offset qualified expenses, which are the amounts paid for the care of your qualifying person while you worked or looked for work. Qualified expenses do not include the amount paid for education (school tuition at the kindergarten level and above), expenses paid by or reimbursed through a subsidy program, overnight camp expenses, child support payments, or payments made to the taxpayer’s child who is under age 19 at the end of the year.

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