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 ($6,300 for the year).What is the amount of Kaelyn's child and dependent care credit if her AGI for the year was $36,000? (Exhibit 8-9 in the text)

Question

Quizplus · Accepted Answer

The child and dependent care credit is calculated as a percentage of the expenses paid for the care of a qualifying individual. For an AGI of $36,000, the applicable percentage is 24%. Therefore, the credit is 24% of $6,300, which equals $1,512. However, the maximum allowable credit for two or more dependents is capped at $6,000, so the credit is 24% of $6,000, which is $1,440.

Kaelyn's Mother,Judy,looks After Kaelyn's Four-Year-Old Twins So Kaelyn Can Go