Kaelyn's mother, Judy, looks after Kaelyn's four-year-old twins so Kaelyn can go to work (she drops off and picks up the twins from Judy's home every day). Since Judy is a relative, Kaelyn made sure, for tax purposes, to pay her mother the going rate for child care ($6,470 for the year). What is the amount of Kaelyn's child and dependent care credit if her AGI for the year was $37,700? (Exhibit 8-9)

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Kaelyn can claim the child and dependent care credit for expenses paid to her mother for looking after her twins, as long as her mother is not her dependent. The credit is a percentage of the amount spent on qualifying child care expenses, which is based on her AGI. Given Kaelyn's AGI of $37,700, the applicable percentage for the credit calculation would result in a credit amount of $1,380.

Kaelyn's Mother, Judy, Looks After Kaelyn's Four-Year-Old Twins So Kaelyn