Sam is a single father with two dependent twin daughters,Amy and Amanda,ages 4.He has AGI of $31,000 and paid $5,300 to a qualified day care center.What amount of credit can Sam receive for child and dependent care credit?

Question

Quizplus · Accepted Answer

To calculate the child and dependent care credit, we need to apply the following formula:

Credit = Qualified expenses x Percentage based on AGI

The qualified expenses are limited to $3,000 for one dependent and $6,000 for two or more dependents. In this case, Sam has two dependents, and he paid $5,300 to a qualified day care center, which is higher than the limit of $3,000 per dependent. Therefore, we can calculate the credit based on the $6,000 limit.

Percentage based on AGI is determined by the AGI of the taxpayer. In this case, Sam's AGI is $31,000, which falls into the 20% bracket. So, the percentage is 20%.

Credit = $6,000 x 20% = $1,200

Therefore, Sam can receive a child and dependent care credit of $1,200. However, this credit is limited to the tax liability, so if Sam's tax liability is less than $1,200, he will only receive a credit for the tax liability amount.

Sam Is a Single Father with Two Dependent Twin Daughters,Amy