Question

Required information [The following information applies to the questions displayed below.] Julie paid a day care center to watch her two-year-old son while she worked as a computer programmer for a local start- up company. What amount of child and dependent care credit can Julie claim in each of the following alternative scenarios? Exhibit 8-9 e. Julie paid $4,350 to the day care center and her AGI is $14,000 ($2,140 salary and $11,860 unearned income). Child and dependent care credit

Answer 1

Applicability:

Since Julie Sons is 2 Years old - He is a Qualifying Child for Claiming Credit of Child and Dependent care Expenses

(As per IRS Publication 503 (2019), Child and Dependent Care Expenses - the minimum Qualifying age to qualify for claiming Credit of Child and Dependent care Expenses is 13 years - if dependent or Child is having any physical or mental disability age limit above 13 years is also considered)

Since Julie Doesn't get any dependent care benefits from employer there are no Exclusions from the Credit available

Income Earning Test: Should Earn Income - Since Julie is Earning income She is Eligible

It is Assumed That Julie Is Filing Returns Individually in absence of information

The Maximum Dollar Limit for Claiming Dependent/Child care credit is $3,000 for single child and $6,000 for two or more children

The Income Considered For Calculating child and dependent care benefits is - adjusted Gross Income - AGI

Given AGI = $14,000

As per ITR publication 503, Below is table of Max percentage of Child And Dependent care credits available

IF your adjusted gross income is:

		THEN the
Over:	But not over:	percentage is:
$ 0	$15,000	35%
15,000	17,000	34%
17,000	19,000	33%
19,000	21,000	32%
21,000	23,000	31%
23,000	25,000	30%
25,000	27,000	29%
27,000	29,000	28%
29,000	31,000	27%
31,000	33,000	26%
33,000	35,000	25%
35,000	37,000	24%
37,000	39,000	23%
39,000	41,000	22%
41,000	43,000	21%
43,000	No limit	20%

Since JULIE  has AGI of $14,000, she is Eligible For 35% credit or Dollar limit of $3,000 subject to the condition that she actually incurred the Expenditure

35% of 14000 = $ 4,900

Actual Expenses Paid = $4,350

Maximum Dollar Limit (One Child) = $3,000

Hence the answer is $3,000