Question

Problem 7-10
Child and Dependent Care Credit (LO 7.3)

Clarita is a single taxpayer with two dependent children, ages 10 and 12. Clarita pays $3,000 in qualified child care expenses during the year.

TABLE 6.1 CHILD AND DEPENDENT CARE CREDIT PERCENTAGES Adjusted Gross Income Applicable Percentage Over But Not Over $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% If her adjusted gross income (all from wages) for the year is $19,600 and she takes the standard deduction, calculate Clarita’s earned income credit and child and dependent care credit for 2019. Click here to view the Earned Income Credit table. Child and dependent care credit.....???? $ Earned income credit.......$5703 $

Answer 1

Maximum qualified child care expenses on which credit is available is $6,000 for two dependent children in 2019. Here, Clarita paid only $3,000 in qualified child care expenses during the year 2019 and therefore credit will be available on $3,000 ($3,000 < $6,000). Adjusted Gross Income is $19,600 (i.e over $19,000 but not over $21,000) and therefore, 32% of qualified child care expenses can be claimed as Child and dependent care credit for 2019. Child and dependent care credit = $3,000 * 32% = $960.