If a registered domestic partner has a dependent and incurs employment-related expenses that are paid out of community funds, the partner (employee partner) may determine the dependent care credit as if he or she made the entire expenditure. In this case, the employee partner has received a gift from his or her partner equal to one-half of the expenditure. The following rules apply when computing the dependent care credit:
- Reduction of Employment-Related Expenses: The employee partner must reduce the employment-related expenses by any amounts excluded from income under section 129 (exclusion for employees for dependent care assistance furnished pursuant to a program described in section 129(d)).
- Earned Income Limitation: The earned income limitation described in section 21(d) is determined without regard to community property laws. This means the employee partner's earned income is considered independently of the community property rules.
- Adjusted Gross Income (AGI): The adjusted gross income of the employee partner is determined by taking into account community property laws. This means the AGI will reflect the community income rules applicable to the registered domestic partners.
For the child tax credit:
- Qualifying Child: A child tax credit is allowed for each qualifying child of a taxpayer for whom the taxpayer is allowed a personal exemption deduction. Thus, if a registered domestic partner has one or more dependents who is a qualifying child, the registered domestic partner may be allowed a child tax credit for each qualifying child.
- Modified Adjusted Gross Income (MAGI): In determining the amount of the allowable child tax credit, the modified adjusted gross income of the registered domestic partner with the qualifying child is determined by taking into account community property laws. This means the MAGI will reflect the community income rules applicable to the registered domestic partners.
- Refundable Portion: Community property laws are ignored in determining the refundable portion of the child tax credit. This means the calculation for the refundable portion will not consider the community property rules and will be based solely on the individual income of the registered domestic partner claiming the credit.
Sources:
Publication 503 (2023)
§ 21. Expenses for household and dependent care services necessary for gainful employment
Publication 555 (3/2020)
