Question

Harry and Wilma are married and file a joint income tax return. On their tax return, they report $44,000 of adjusted gross income ($20,000 salary earned by Harry and $24,000 salary earned by Wilma) and claim two exemptions for their dependent children. During the year, they pay the following amounts to care for their 4-year old son and 6- year old daughter while they work.

ABC Day Care Center                        $3,200

Blue Ridge Housekeeping Services    2,000

Mrs. Mason (Harry’s mother)           1,000

Harry and Wilma may claim a credit for child and dependent care expenses of:

Answer 1

According to IRS (Internal Revenue Service) The maximum credit that Harry and Wilma can claim is 20% of the $6000 which is a limit of dependent care expenses for 2 or more dependents established by the IRS (Internal Revenue Service)

During the year, they pay the following amounts to care for their 4-year old son and 6- year old daughter while they work.

ABC Day Care Center                        $3,200

Blue Ridge Housekeeping Services $2,000

Mrs. Mason (Harry’s mother) $1,000

Total = $ 6200

They can't claim 20% of the whole amount of $6200 of child care they can claim only 20% of $6000.

Therefore Harry and Wilma may claim a credit for child and dependent care expenses of: $6000 * 20% = $1200