Kylie is a single mom with two dependent children,Tanner,age 7 and Olivia,age 11.She has AGI of $38,000 and paid $5,300 to a qualified day care center for the two children.What amount of credit can Kylie receive for the child and dependent care credit?

Question

Quizplus · Accepted Answer

The child and dependent care credit is calculated as a percentage of the amount paid for daycare expenses. The percentage ranges from 20% to 35%, depending on the taxpayer's adjusted gross income (AGI). In Kylie's case, her AGI is $38,000, which puts her in the 20% credit rate range.

To calculate the credit, we use the following formula:
Credit amount = daycare expenses x credit rate

In this case, the daycare expenses are $5,300, and the credit rate is 20%, so we have:
Credit amount = $5,300 x 0.20
Credit amount = $1,060

This means that Kylie can receive a child and dependent care credit of $1,060, which is closest to choice D, $1,219. It is important to note that the maximum amount of expenses that can be used for the credit is $3,000 for one child and $6,000 for two or more children. Therefore, Kylie's credit is limited to $1,060 instead of the full $5,300.

Kylie Is a Single Mom with Two Dependent Children,Tanner,age 7