Clark, a widower, maintains a household for himself and his two dependent preschool children.For the year ended December 31, 2018, Clark earned a salary of $32,000.He paid $3,600 to a housekeeper to care for his children in his home, and also paid $1,500 to a kiddie play camp for child care.He had no other income or expenses during 2018.Before considering any limitation due to tax liability, how much can Clark claim as a child and dependent care credit in 2018?

Question

Quizplus · Accepted Answer

Clark can claim a maximum credit of $1,500 for child care expenses for one child, or $3,000 for two or more children. Since Clark has two dependent preschool children, his maximum credit is $3,000. To calculate the credit, Clark must use the lower of his earned income or his spouse's earned income, if he had a spouse living with him. In this case, Clark's earned income of $32,000 is higher than his spouse's earned income, since he is a widower. Therefore, Clark can claim a credit equal to 20% of his child care expenses, up to the maximum of $3,000. This means his credit is $1,500 ($750 of $3,600 paid to housekeeper and $750 of $1,500 paid to kiddie play camp). Additionally, since his income is on the lower end, he can claim the full credit without any limitation. Therefore, the correct answer is C) $1,326.

Clark, a Widower, Maintains a Household for Himself and His