Question

1. Jenna and Fred are married with two children, ages 4 and 2. Jenna and Fred both work full time, so they pay a day-care $12,000 in 2019 to take care of their children. Jenna’s wages are $87,000, and Fred’s wages are $84,000. They have no other income or adjustments to gross income. Compute their credit for child and dependent care credit for 2019.

Answer 1

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Answers is highlighted in yellow Per Tax rule 2019: Solution: Answer Explanation: $ 1,200 As per IRS, child and dependent care credit is from 20% to 35% of upto $3000 of one qualifying child. Maximum Credit amount is $6000 for two or more childs under age 13. Eligible care cost will be lesser of actual cost or $6000 for 2 or more chidren. To qualify Child care credit, both spouce must have earned income. Qualifying child expense will be limited to the earned income of a spouce. E.g. lesser of 6000 or 84000. A familty with total earning $43,000 or more will be allowed a 20% of dependent care credit. Therefore, (6000 20%) $1,200