Child and Dependent Care Credit (LO 6.3) Marty and Jean are married and have 4-y

Question

Child and Dependent Care Credit (LO 6.3) Marty and Jean are married and have 4-year-old twins. Jean is going to school full-time for 9 months of the year, and Marty earns $45,000. The twins are in day care so Jean can go to school while Marty is at work. The cost of day care is $10,000 TABLE 6.1 CHILD AND DEPENDENT CARE CREDIT PERCENTAGES Adjusted Gross Income Applicable Percentage Over -$15,000 17,000 19,000 21,000 23,000 23,000 -25,000 27,000 29,000 31,000 33,000 33,000-35,000 37,000 39,000 41,000 43,000 No limit What is their child and dependent care credit? 35% 3496 3396 32% 31% 30% 2996 28oo 27% 26% 25% 24% 230%% 22% 21% 209% $0 15,000 - 17,000 - 19,000- 21,000 - 25,000 - 27,000 - 29,000- 31,000- 35,000- 37,000 39,000- 41,000- 43,000-

Explanation / Answer

Qualified expenses $      10,000 Cost of day care Maximum for two dependents $        6,000 ($3,000*2) Credit percentage                      20% (Adjusted gross income is $45,000, and 20% is the percentage in the table for income above $43,000) Credit allowed $        1,200 ($6,000*20%) What is their child and dependent care credit? $               1,200

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