Child Care Subsidy Taxable Income Information

Covered Expenses

Eligible expenses for dependent (child) care must be connected with the custodial care of children who are under the age of 60 months and are claimed as an exemption on your federal income tax return or are in your custodial care 50% of the time or greater. Expenses must be for the following types of dependent (child) care provided during work or school-related hours:

  • Nursery Schools
  • Licensed Day Care Centers
  • Private Family Day Care Provides or Babysitters

IRS Reporting

For students who are US citizens:

  • If you are a student and EMPLOYED by the University, you may exclude from your gross income up to $5,000 of employer provided dependent care assistance in any taxable year, as long as you did not participate in the University of Iowa dependent care spending account program; these child care dollars are considered employer provided dependent care assistance.
  • If you participated in the University of Iowa dependent care spending account program, the $5,000 exclusion is limited by the amount deferred in the dependent care spending account program.
  • If you are a student and NOT employed by the University, the child care dollars awarded to you are taxable. It is your responsibility to claim these funds when filing your tax return.

For students who are nonresident aliens:

  • If you are a student and EMPLOYED by the University, these child care dollars are not taxable income. You do not need to claim these child care dollars when filing your tax return (1040NR).
  • If you are a student and NOT employed by the University, the University is obligated to withhold 14% of the child care dollars awarded to you for taxes. When you file a U.S. tax return (1040NR), the amount withheld for taxes may be refunded to you. F1/J1 students may access filing documents on the¬†International Students and Scholars¬†web site.