Robert and Mary file a joint tax return for 2019 with adjusted gross income of $34,000. Robert and Mary earned income of $20,000 and $14,000, respectively, during 2019. In order for Mary to be gainfully employed, they pay the following child care expenses for their 4-year-old son, John: Union Day Care Center $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $$\$ 1,700$
Wilma, baby sitter (Robert's mother) $\quad $ $\quad $ $\quad $$\$ 1,000$ What is the amount of the child and dependent care credit they should report on their tax return for 2019 (assume no tax liability limitation)?

Question

Quizplus · Accepted Answer

The child and dependent care credit is calculated as a percentage of the child care expenses paid, based on the taxpayer's adjusted gross income (AGI). The percentage ranges from 35% for AGI of $15,000 or less, to 20% for AGI of $43,000 or more. In this case, Robert and Mary's AGI is $34,000, which falls within the 20% range. Therefore, they can claim 20% of their child care expenses, which is $1,350 ($6,750 x 20%). Since the maximum credit amount for one dependent is $1,050, they can claim a credit of $1,050 for John's care expenses. However, since they paid $375 for John's care expenses using a dependent care FSA, they can only claim a credit for the remaining $675 ($1,050 - $375). Therefore, the amount of the child and dependent care credit they should report on their tax return for 2019 is $675.

Robert and Mary File a Joint Tax Return for 2019 \quad

Robert and Mary File a Joint Tax Return for 2019 $\quad$