Question

(Child Care Expenses) Both Mr. Fortin and Mrs. Fortin are employed. During 2018, Mr. Fortin had opened a restaurant business income of $8,000, Mrs. Fortin had employment income of $84,000, mostly from sales during 2018. and had commission Since Mrs. Fortin's work required a good deal of travel away from home and Mr required him to work long hours, including many evenings, they had to pay for care of their children. Payments for childcare amounted to $400 per week, for a total ot f 48 weeks uring the current year, there was a period of six weeks during which Mr. Fortin was hosptlized ue to injuries suffered during a game of Ultimate Frisbee. This period was part of the 48 weeks for which child care payments were made. Required: Determine the maximum amount that can be deducted by Mr, and Mrs. Fortin for the year ending December 31, 2018 for child care expenses under the following assumptions A. They have two children, neither of whom qualify for the disability tax credit. Their ages are 2 and 4 years old. They have three children, none of whom qualify for the disability tax credit. Their ages are 2,4 and 15 years old. B.

Answer 1

Major point to remember for qualifying deduction of child care expenses:

1. You (and your spouse if married Filing Jointly) earned income from employment or self-employment.
2. If you are married and filing a joint tax returns, your spouse must also have earned income.
3. You had to pay for child or dependent care so that you (and your spouse if Married Filing Jointly) could work, seek employment, or attend school, or if you were disabled.

A Qualifying Person for the Child and Dependent Care Credit can be either of the following:

1. Any child who is your dependent and was under age 13 when the care was provided, or
2. Your spouse or dependent age 13 or over, if physically or mentally incapable of caring for themselves.

Extent of deduction:-

1. The Child and Dependent Care Credit can be worth from 20% to 35% of some or all of the dependent care expenses you paid. The percentage you use depends on your income. If your income is below $15,000, you will qualify for the full 35%. The percentage falls by 1% for every additional $2,000 of income until it reaches 20% (for an income of $43,000 or more).
2. Max amount is $3000 for one person and $ 6000 for two or more qualify person.
3. Before figuring the credit, you must reduce your qualifying expenses by any amount of child or dependent care benefits that were provided by your employer and that you deducted or excluded from your income.

Note: Since joint income is more than 43000 so 20% of qualified amount will be allowed.

Answer A:

Since both children aged fewer than 13 so 20% of child care expenses will be allowed.

Child care expenses = $400 per week * 48 weeks = $ 19,200 but maximum upto $ 6000 only

So Child care expenses would be 6000*20% = $1200

Answer B:

Since one child aged more than 13 so proportionate amount of 19,200 will be disqualified i.e. 6400 so child care expenses will be 12800 but due to limit it will be restricted to 6000

So Child care expenses would be 6000*20% = $1200