Kobe is a single dad with two dependent children,Lizzie,age 7 and Leslie,age 3.He has AGI of $51,000 and paid $3,700 to a qualified day care center.What amount of credit can Kobe receive for the child and dependent care credit?

Question

Quizplus · Accepted Answer

The child and dependent care credit is calculated based on a percentage of qualified expenses, up to a maximum of $3,000 for one dependent or $6,000 for two or more dependents. In this case, Kobe paid $3,700 for the care of his two children, which exceeds the maximum limit for the credit. Therefore, the credit amount is limited to $3,000 for two dependents. The credit percentage is based on Kobe's AGI, which falls in the 20% bracket. Therefore, the credit amount is calculated as follows: $3,000 x 20% = $600 per child, for a total credit of $1,200. However, the maximum credit is limited to the smaller of the actual expenses paid or the maximum limit. Therefore, Kobe can claim a child and dependent care credit of $740 ($1,200 x $3,000/$3,700).

Kobe Is a Single Dad with Two Dependent Children,Lizzie,age 7