Bud and Stella are married,file a joint return,and have one child,age 3.Their combined AGI is $35,000.Bud and Stella incur $3,500 of child care expenses during the current year.The child and dependent care credit is
A)$600.
B)$700.
C)$750.
D)$875.

Question

Quizplus · Accepted Answer

The child and dependent care credit is calculated as a percentage of eligible expenses, with a maximum credit of $3,000 for one child. The percentage ranges from 20% to 35%, depending on the taxpayer's AGI. In this case, Bud and Stella's AGI is below $43,000, so they are eligible for a 35% credit on up to $3,000 of child care expenses. Therefore, their credit would be $3,000 x 35% = $1,050. However, since their actual expenses were only $3,500, their credit is limited to that amount. Therefore, their child and dependent care credit is $750.

Bud and Stella Are Married,file a Joint Return,and Have One