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Are child care subsidy payments taxed?

April 26, 2017child care PAYMENTS subsidy TAXED

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Are child care subsidy payments taxed?

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A6. Yes, in some circumstances. There are tax implications when receiving child care subsidy (plus dependent care flexible spending account (DCFSA) deductions, if applicable) greater than $2,500 per year if married and filing separately, or $5,000 per year if married filing jointly, single, or head of household. VA Child Care Subsidy Program payments may be excluded from an employees gross income if the employees child(ren) meets the Internal Revenue Services definition of a dependent. If the child(ren) does not meet this definition, the employee may still receive the subsidy, but it will be treated as taxable income. Employees should consult their tax advisor for a detailed explanation of how this subsidy affects their particular situation.