Clark, a widower, maintains a household for himself and his two dependent preschool children. For the year ended December 31, 2014, Clark earned a salary of $32,000. He paid $3,500 to a housekeeper to care for his children in his home, and also paid $1,500 to a kiddie play camp for child care. He had no other income or expenses during 2014. How much can Clark claim as a child care credit in 2014?

Question

Quizplus · Accepted Answer

The child care credit is calculated as a percentage of the lower of earned income or child care expenses. In this case, Clark's earned income is $32,000, and his child care expenses total $5,000 ($3,500 housekeeper + $1,500 play camp). Since the child care credit is limited to $3,000 for one dependent or $6,000 for two or more dependents, Clark can only claim a credit on the first $3,000 of his child care expenses. The percentage used to calculate the credit depends on Clark's adjusted gross income (AGI), but assuming it is below certain thresholds, he can claim a credit of up to 35% of the first $3,000 of child care expenses, or $1,050. Therefore, the best choice is B, as it is the closest option to $1,050.

Clark, a Widower, Maintains a Household for Himself and His