Dos & Don'ts for Handling Resident's Child-Care Expenses in Special Circumstances

Most managers find it easy to calculate the allowance for child-care expenses when the care allows the only adult member of the household to work. The child-care expenses are simply deducted from household income up to the amount of the member's earned income. But calculating the allowance isn't always so straightforward. For example, child care may allow the household member to go to school as well.

To help you in this and other special circumstances, here are some dos and don'ts to keep in mind when calculating households' child-care allowances.

Prorate Expenses that Are Partially Work-Related

If a household asks you to deduct child-care expenses and only part of those expenses enable household members to work, be sure to calculate the work-related child-care expenses separately, says housing consultant Mark Alper.

Child-care expenses may be deducted from household income if they allow household members to work, attend school or vocational training (full or part time), or look for new employment after losing a job. But work-related child-care expenses can be deducted from household income only up to a capped amount. They can't exceed the amount of income earned as a result of the child care. To calculate the allowance the right way, you must determine the allowance for work-related child-care expenses separately from the allowance for other eligible child-care expenses [HUD Handbook 4350.3, par. 5-10(B)(2)].

Example: John Doe pays for 49 hours of child care at the rate of $9 an hour for a total of $441 per week for his 2- and 3-year-old daughters. Of the 49 hours, 45 hours of child care per week allow Doe to work at his job, which pays him $360 per week. Doe also pays for four hours of child care per week so that he can attend evening computer courses at a local community college. Doe's work-related child-care expenses total $405 per week ($9 x 45 hours). But the allowance for his work-related child care is capped at $360, the amount the child care enables him to earn. Doe's school-related child-care expenses, which total $36 per week ($9 x 4 hours), are fully covered by the allowance. His total child-care expenses allowance is $396 per week ($360 + $36).

Don't Refuse Allowance Because Another Household Member Could Give Care

When a household has more than one adult member, don't deny the child-care expense allowance because, in your opinion, another adult household member could provide the child care. HUD says that only the household itself can determine whether another adult household member is both available and capable of providing child care [HUD Handbook 4350.3, par. 5-10(B)(1)(b)].

Example: Jane Roe lives with her 5-year-old son and her mother. Roe pays for child care for her son while she works as a nurse. Roe's mother isn't employed and appears capable of looking after the child. The household is entitled to a child-care expense allowance.

It may seem as though this gives households leeway to manipulate the extent of their child-care expense allowance. But since the allowance applies only to out-of-pocket expenses paid to non-household members, household members are unlikely to profit from doing so.

Cap Full-Time Student's Work-Related Child-Care Expense at $480

If an adult household member (18 or older) is both employed and a full-time student but is not the household head, co-head, or spouse, give the household member a maximum allowance of $480 for work-related child care. HUD sets this cap because only the first $480 of a full-time student's earned income can be included in household income [Handbook 4350.3, par. 5-6(A)(3)(d)]. According to HUD, a full-time student is any household member taking what's considered a full course load at a school or vocational training program [Handbook 4350.3, par. 5-10(A)(3)].

Example: James Wade, a full-time student, pays $80 per week for child care so that he can attend school. He pays another $40 per week for child care so that he can work part time. He earns only $100 per week. Wade isn't the household head, co-head, or spouse. The $80 per week Wade pays for child care during the 46 weeks per year that he attends school, for a total annual expense of $3,680 ($80 x 46 weeks), can be included in full in the household's child-care allowance. But the $40 per week he pays for child care during the 52 weeks per year that he works, for a total annual expense of $2,080 ($40 x 52 weeks), can't be included in full in the household's child-care allowance. This amount exceeds the $480-per-year cap on work-related child-care expenses for full-time students. The household's child-care allowance is $4,160 ($3,680 + $480).

Insider Source

Mark S. Alper: Vice President of Compliance, National Center of Housing Management; 333 N. 1st St., Ste. 305, Orange Park, FL 32073; www.nchm.org.