Harry and Wilma are married and file a joint income tax return. On their tax return, they report $44,000 of adjusted gross income ($20,000 salary earned by Harry and $24,000 salary earned by Wilma) and claim two exemptions for their dependent children. During the year, they pay the following amounts to care for their 4-year old son and 6-year old daughter while they work.
Harry and Wilma may claim a credit for child and dependent care expenses of:

Question

Harry and Wilma are married and file a joint income tax return. On their tax return, they report $44,000 of adjusted gross income ($20,000 salary earned by Harry and $24,000 salary earned by Wilma) and claim two exemptions for their dependent children. During the year, they pay the following amounts to care for their 4-year old son and 6-year old daughter while they work. ​
 Harry and Wilma may claim a credit for child and dependent care expenses of:

Quizplus · Accepted Answer

To calculate the credit for child and dependent care expenses, we must first calculate the maximum credit allowed, which is $3,000 for one qualifying individual or $6,000 for two or more qualifying individuals. In this case, since Harry and Wilma have two dependents, the maximum credit they can claim is $6,000.

Next, we need to calculate the couple's income percentage. Income percentage is calculated by dividing their adjusted gross income (AGI) by $15,000 ($3,000 for one dependent). In this case, the couple's income percentage is 2.93 ($44,000/$15,000).

The credit percentage is then determined based on the couple's income percentage. The credit percentage ranges from 20% to 35% and decreases as the income percentage increases. In this case, the couple's credit percentage is 20%.

Finally, we can calculate the credit amount by multiplying the maximum credit allowed ($6,000) by the credit percentage (20%). The resulting credit amount is $1,200, which is choice C.

Harry and Wilma Are Married and File a Joint Income