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any distribution from a QTP used by qualified education expenses.To receive this tax benefit the program must be established by a state government or agency. For years after 2002, they may also be established and maintained by eligible educational institutions, such as, colleges, vocational schools or other post-secondary educational institutions.¶5235 DEPENDENT CARE ASSISTANCE PROGRAMSAn employee receiving dependent care assistance payments provided under an employer’s written nondiscriminatory plan generally may exclude such payments from gross income. Code Sec. 129. The exclusion for employer-provided dependent care assistance is limited to $5,000 a year ($2,500 in the case of a separate return by a married individual). Also, the exclusion is subject to an earned income limitation. Thus, an unmarried taxpayer may not exclude from gross income more than his or her earned income for the tax year, and a married taxpayer may not exclude more than the lesser of his or her earned income or the spouse’s earned income. In applying the earned income test for a married taxpayer, the earned income of an incapacitated or student spouse is deemed to be $250 per month if one qualifying dependent is involved or $500 if two or more qualifying dependents are involved.The employer’s plan must be for the exclusive use of its employees and must not discriminate in favor of employees who are officers, owners, or highly compensated employees or their dependents. The purpose of the service provided must be to enable an individual to work. An employee who excludes the value of child or dependent care services from income may not claim any income tax deduction or credit with respect to such amounts.Qualifying expenses include amounts paid for household services and care of the qualifying person. A qualifying person is any child under age 13, a disabled spouse, or any disabled person, provided that the qualifying person is a dependent of the taxpayer. The person who provides the care may not be the taxpayer’s spouse or a person claimed by the taxpayer as a dependent. Further, if the taxpayer’s child provides the care, the child must be age 19 or older by the end of the tax year.The exclusion for employer-provided dependent care assistance may not be claimed unless the taxpayer reports the dependent care provider’s correct name, address, and taxpayer identification number on the tax return. The exclusion may be claimed even though the information is not provided if it can be shown that the taxpayer exercised due diligence in attempting to provide this information. Code Sec. 129(e)(9). Similar information reporting requirements also apply to employers that provide dependent care programs for their employees. The exclusion for dependent care assistance programs must be coordinated with the dependent care credit. (Chapter9)
¶5255 MILITARY BENEFITSQualified military benefits are excluded from gross income. Qualified military benefits are benefits that are received either in cash or in kind by members of the armed services or their
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Taxation in the United States, social security benefits