Question

me: Jacqueline and John, married, and earned income $74,873 in 2018. They have two children, Kenneth and Aaron who are 3 and 5 years old. Jacqueline and John paid $10,000 in day care for Kenneth and Aaron in 2018. John's employer reimbursed $5,000 of dependent care expense. Jacqueline had full-year health insurance coverage for ner household from her employer. The insurance premium deducted from her paycheck was $13,000 in 2018. Based on the facts above, please answer the following questions: 4. a. What is the best filing status for Jacqueline and John? How much child and dependent care expense can Jacqueline and John claim on their joint return? Please explain. b. MacBook Air

Answer 1

1. Married Filing JointlyJoint

• ​​​​​​​ On a joint tax return, a married couple must report their combined income and deductions. Note that you can file a joint return even if one spouse has no income or deductions. Also keep in mind, the standard deductionmay be higher for joint filers, and you may qualify for a variety of tax benefits that would not otherwise apply.
• In general, married couples have the option of filing a joint tax return or separate returns. An exception is if one spouse is a nonresident alien, in which case the couple must file separately. Aside from that, most couples find that their income tax liability is lower if they file jointly, as opposed to filing separately.

2. Tax credit for day care and dependent expense : If you paid a daycare center, babysitter, summer camp, or other care provider to care for a qualifying child under age 13 or a disabled dependent of any age, you may qualify for a tax credit of up to 35 percent of qualifying expenses of $3,000 for one child or dependent, or up to $6,000 for two or more children or dependents.

• The child and dependent care credit provides a tax break for many parents who are responsible for the cost of childcare. Though the credit is geared toward working parents or guardians, taxpayers who were full-time students or who were unemployed for part of the year may also qualify.
• So, as they are having 2 child and below the age of 13 years . Therefore , tax credit can be Claimed is upto 35 % of 6000 = $2,100.

3. Yes, in certain circumstances, she can deduct health insurance premiums as part of her overall medical claim.

But she can deduct only premiums that she pay with after-tax money from her own pocket. Except For example:

• If health insurance premiums are paid entirely by her employer or the government, you cannot deduct the cost.
• If she have health insurance through her employer and her share of the premium is deducted from her paycheck pre-tax, she cannot deduct the cost because the premiums were tax-free already. If she don’t know whether you pay pre-tax or after-tax, ask your human resources department.
• If she buy health insurance through the state- or federally run health insurance marketplaces, she can deduct only the portion of the premium she pay out of her own pocket. she cannot deduct the amount of any subsidy.
• If she buy an individual or family health insurance plan, either on the open market or through a marketplace, and she pay all of the cost out of pocket, then the whole amount is deductible.
• Her total medical expenses, including premiums, must surpass 7.5 percent of her adjusted gross income to be deductible.

Therefore, as the she had full - year health insurance coverage from her employer and the tax was deducted from pre tax paycheck , so she cannot deduct premium as it is already considered tax free.