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You Must Have Earned Income: Child and Dependent Care Tax Benefits (2025 IRS Guide)

This guide covers “You Must Have Earned Income” within child and dependent care tax benefits. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 503 (2025), Child and Dependent Care Expenses, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Context for these rules

To be able to claim the credit for child and dependent care expenses, you must file Form 1040, 1040-SR, or 1040-NR, and meet all the tests in Tests you must meet to claim a credit for child and dependent care expenses next.

You Must Have Earned Income

To claim the credit, you (and your spouse if filing jointly) must have earned income during the year.

Earned income.

Earned income includes wages, salaries, tips, other taxable employee compensation, and net earnings from self-employment. A net loss from self-employment reduces earned income. Earned income also includes strike benefits and any disability pay you report as wages.

Generally, only taxable compensation is included. For example, foreign earned income you exclude from income isn't included. However, you can elect to include nontaxable combat pay in earned income. If you are filing a joint return and both you and your spouse received nontaxable combat pay, you can each make your own election. (In other words, if one of you makes the election, the other one can also make it but doesn't have to.) Including this income will give you a larger credit only if your (or your spouse's) other earned income is less than the amount entered on line 3 of Form 2441.

Tip:

You can elect to include your nontaxable combat pay in earned income when figuring your credit for child and dependent care expenses, even if you elect not to include it in earned income for the earned income credit or the exclusion or deduction for dependent care benefits.

Members of certain religious faiths opposed to social security.

This section is for persons who are members of certain religious faiths that are opposed to participation in Social Security Act programs and have an IRS-approved form that exempts certain income from social security and Medicare taxes. These forms are:

  • Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners; and

  • Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits, for use by members of recognized religious groups.

Each form is discussed here in terms of what is or isn't earned income for purposes of the child and dependent care credit. For information on the use of these forms, see Pub. 517, Social Security and Other Information for Members of the Clergy and Religious Workers.

Form 4361.

Whether or not you have an approved Form 4361, amounts you received for performing ministerial duties as an employee are earned income. This includes wages, salaries, tips, and other taxable employee compensation.

However, amounts you received for ministerial duties, but not as an employee, don't count as earned income. Examples include fees for performing marriages and honoraria for delivering speeches.

Any amount you received for work that isn't related to your ministerial duties is earned income.

Form 4029.

Whether or not you have an approved Form 4029, all wages, salaries, tips, and other taxable employee compensation are earned income.

However, amounts you received as a self-employed individual don't count as earned income.

What isn't earned income?

Earned income doesn't include:

  • Amounts excluded as foreign earned income (including any housing exclusion) on Form 2555, line 43;

  • Pensions and annuities;

  • Social security and railroad retirement benefits;

  • Workers' compensation;

  • Interest and dividends;

  • Unemployment compensation;

  • Scholarships or fellowship grants, except for those reported on Form W-2 and paid to you for teaching or other services;

  • Nontaxable workfare payments;

  • Child support payments received;

  • Income of a nonresident alien that isn't effectively connected with a U.S. trade or business; or

  • Any amount received for work while an inmate in a penal institution.

Rule for student-spouse or spouse not able to care for self.

Your spouse is treated as having earned income for any month that they are:

  1. A full-time student, or

  2. Physically or mentally not able to care for themselves. (Your spouse must also live with you for more than half the year.)

If you are filing a joint return, this rule also applies to you. You can be treated as having earned income for any month you are a full-time student or not able to care for yourself.

Figure the earned income of the nonworking spouse, described under (1) or (2) above, as shown under Earned Income Limit under How To Figure the Credit, later.

This rule applies to only one spouse for any 1 month. If, in the same month, both you and your spouse didn't work and are either full-time students or not physically or mentally able to care for yourselves, only one of you can be treated as having earned income in that month.

Full-time student.

You are a full-time student if you are enrolled at a school for the number of hours or classes that the school considers full-time. You must have been a full-time student for some part of each of 5 calendar months during the year. (The months need not be consecutive.)

School.

The term “school” includes high schools, colleges, universities, and technical, trade, and mechanical schools. A school doesn't include an on-the-job training course, correspondence school, or school offering courses only through the Internet.

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.

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