Background
Federal courts have confirmed that expenses incurred for the care of a dependent, such as babysitting or daycare, while the taxpayer is at work, are not included in deductible business expenses and are not deductible under IRC section 162(a). As a result, single-earner households with qualifying individuals are favored over two-earner households with qualifying individuals, as the cost of daycare often outweighs the extra income made in two-earner households. IRC section 21 serves to lessen this imbalance by allowing a limited credit for certain expenses related to the care of a qualified dependent.
Read more about this topic: Child And Dependent Care Credit
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