Clark, a widower, maintains a household for himself and his two dependent preschool children. For the year ended December 31, 2015, Clark earned a salary of $32,000. He paid $3,600 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 2015. How much can Clark claim as a child and dependent care credit in 2015?

Question

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The child and dependent care credit is calculated based on your earned income and the amount paid for care expenses. The credit is equal to 20-35% of eligible expenses, with a maximum of $3,000 in expenses per child for a total maximum credit of $1,050 for one child or $2,100 for two or more children. In this case, Clark's eligible expenses are $3,600 for the housekeeper and $1,500 for the kiddie play camp, for a total of $5,100. Since Clark's earned income was $32,000, which is less than $43,000, he is eligible for the maximum credit of 35% of his eligible expenses. Therefore, Clark can claim a child and dependent care credit of 35% x $5,100 = $1,785. However, since the maximum credit for two or more children is $2,100, Clark's credit is limited to that amount. Finally, the credit is gradually reduced for taxpayers with higher incomes, but since Clark's income is below the threshold, his credit is not affected. Therefore, Clark can claim a child and dependent care credit of $1,500 for 2015.

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