Sam is a single father with two dependent twin daughters,Amy and Amanda,ages 4.He has AGI of $31,000 and paid $5,300 to a qualified day care center.What amount of credit can Sam receive for child and dependent care credit?
A)$1,060.
B)$1,431.
C)$3,000.
D)$5,300.

Question

Quizplus · Accepted Answer

To calculate the child and dependent care credit, Sam needs to multiply his eligible expenses by a percentage based on his AGI. The maximum eligible expenses are $3,000 per child, so for two children, the maximum is $6,000. However, since Sam only paid $5,300, that is what we will use. 
The percentage used in the calculation is based on AGI, as follows:
- AGI of $15,000 or less: 35%
- AGI over $15,000 to $43,000: gradually decreasing from 35% to 20%
Since Sam's AGI is $31,000, we need to look at the chart to determine the percentage. It appears that his percentage would be 20%. 
Therefore, the credit he can receive is: 
0.20 x $5,300 = $1,060
Choice A is incorrect because it is too high - it would be the answer if the percentage were 35%, which is not applicable in this case. 
Choice C is incorrect because it is over the maximum eligible expenses. 
Choice D is incorrect because it is the same amount as the eligible expenses, but doesn't take into account the AGI percentage.

Sam Is a Single Father with Two Dependent Twin Daughters,Amy