An unmarried taxpayer’s elderly mother lives with her. The taxpayer pays $200 pe

Question

An unmarried taxpayer’s elderly mother lives with her. The taxpayer pays $200 per week to an adult care center to watch the mother while the taxpayer is at work. The taxpayer’s W-2 income is $54,000, her AGI is $50,000, and her taxable income is $34,500. AGI Over But not over Decimal amount is AGI Over But not over Decimal amount is $0 – 15,000 0.35 $29,000 – 31,000 0.27 15,000 – 17,000 0.34 31,000 – 33,000 0.26 17,000 – 19,000 0.33 33,000 – 35,000 0.25 19,000 – 21,000 0.32 35,000 – 37,000 0.24 21,000 – 23,000 0.31 37,000 – 39,000 0.23 23,000 – 25,000 0.30 39,000 – 41,000 0.22 25,000 – 27,000 0.29 41,000 – 43,000 0.21 27,000 – 29,000 0.28 43,000 – No limit 0.20 What is the amount of the taxpayer’s child and dependent care credit?

Explanation / Answer

1. Total amount of expense paid by the individual = $200 x 52 weeks = $10,400

As per IRS, amount of expense that can be used for taking the credit should be maximum of $3,000. In the given case, since it is more than $3,000. The credit will be given on certain percentage of $3,000. The percentage depends on the amount of the Adjusted gross income of the individual.

In the given case, AGI of person is $50,000 which means that she can claim the lowest possible credit of 0.20 on the amount of $3,000.

Amount of Dependent care credit = $3,000 x 0.20 = $600

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