Bud and Katie Milner file a joint return. During the year, they paid $11,000 to
ID: 2382608 • Letter: B
Question
Bud and Katie Milner file a joint return. During the year, they paid $11,000 to their nanny to look after their three children, ages 2, 9, and 11. Bud and Katie both work and earned $24,000 and $31,000, respectively. The wages are the Milners' only source of income, and they have no deductions for AGI.
a.Compute the Milners' child and dependent care credit.
b. Compute the Milners' child and dependent care credit assuming Katie received a $4,000 non- taxable reimbursement from her employer's dependent care assistance plan.
Explanation / Answer
Ans 1 Details Amount Work related expense qualifies for credit= Lower of Actual Work related expense, Earned income limit and Dollar Limit Actual Expense 11,000.00 Earned income limit 24,000.00 Dollar Limit 6,000.00 Qualifying amount for credit 6,000.00 Amount of Credit=Qualifying amount * 20% 1,200.00 AGI is 55,000 , hence rate of credit is 20% Ans 2 Details Amount Work related expense qualifies for credit= Lower of Actual Work related expense, Earned income limit and Dollar Limit Actual Expense 11,000.00 Earned income limit 24,000.00 Dollar Limit 6,000.00 Qualifying amount for credit 6,000.00 Less :Dependent care assitance excluded from AGI -4,000.00 2,000.00 Amount of Credit=Qualifying amount * 20% 400.00 AGI is 55,000 , hence rate of credit is 20%
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