Capping the Child Care Expense Allowance
Under the Section 8 program, tenants may be eligible for the child care expense allowance, which allows for reasonable out-of-pocket, unreimbursed child care costs for the care of a child under 13 years of age to be deducted (dollar-for-dollar) from the household income, potentially resulting in a lower tenant rent.
To qualify, the child care must be necessary to, among other things, enable a household member to work. In such cases, the annualized child care expense may be deducted from the applicable household member’s annual employment income.
Example: The tenant resides with her 10-year-old son (who qualifies for the $480 dependent allowance). The tenant receives annual employment and Social Security income of $10,000 and $6,500, respectively, for a total of $16,500, and pays $8,000 in reasonable out-of-pocket, unreimbursed child care expenses while she works. Therefore, deduct the $8,000 in child care costs (along with the $480 dependent allowance) from annual income and calculate the Total Tenant Payment (TTP) as follows:
Annual Income: $16,500
Less Child Care Expense: $8,000
Less Dependent Allowance $480
Adjusted Income $8,020
Total Tenant Payment $201
Keep in mind that HUD caps the child care expense allowance that enables a household member to work by the employment income earned by that household member. As such, the child care expense allowance cannot exceed the employment income attributed to the applicable household member.
Example: The tenant resides with her 10-year old son (who qualifies for the $480 dependent allowance). The tenant receives annual employment and Social Security income of $10,000 and $6,500 (for a total of $16,500), and pays $12,000 in out-of-pocket, unreimbursed reasonable child care expenses while she works. In this case, although the household pays $12,000 in child care expenses, it is eligible to receive a child care expense allowance of only $10,000 (and the $480 dependent allowance).
Annual Income: $16,500
Less Child Care Expense: $10,000
Less Dependent Allowance $480
Adjusted Income $6,020
Total Tenant Payment $151
In the first example, the tenant received the full $8,000 child care expense allowance since the out-of-pocket costs did not exceed the annual employment income of $10,000.
In the second example, although the tenant spent $12,000 on child care expenses, the child care expense allowance was limited to the annual employment income of $10,000.
Remember, to properly apply the child care expense allowance, HUD requires that the child care expense be coded on the 50059 as “C” (Able to Work code) for the household member enabled to work.
