Jamil and Vicki have one child,aged 3,for whom they paid childcare expenses of $2,500 this year.If they are eligible for a 20% dependent care credit plus child tax credit,by how much will these credits reduce their tax liability?

Question

Quizplus · Accepted Answer

The maximum amount of allowable expenses for the dependent care credit is $3,000 for one child. Since Jamil and Vicki paid $2,500 in childcare expenses, they will be able to claim the full $2,500 as expenses for the dependent care credit.
The maximum credit they can receive for the dependent care credit is 20% of the eligible expenses, which is $500 (20% x $2,500).
In addition to the dependent care credit, they can also claim the child tax credit, which is $2,000 per child under the age of 17. This brings their total tax credit to $2,500 ($500 dependent care credit + $2,000 child tax credit).
Therefore, their tax liability will be reduced by $2,500. The correct answer is B.

Jamil and Vicki Have One Child,aged 3,for Whom They Paid