Tim and Martha paid $7,900 in qualified employment-related expenses for their th

Question

Tim and Martha paid $7,900 in qualified employment-related expenses for their three young children, who live with them in their household. Martha received $1,800 of dependent care assistance from her employer, which was properly excluded from gross income. The couple had $57,000 of AGI earned equally. Use Child and Dependent Care Credit AGI schedule, a. What amount of child and dependent care tax credit can they claim on their Form 1040? b. How would your answer differ (if at all) if the couple had AGI of $36,000 that was earned entirely by Tim? a. Child and dependent care tax credit $6,600 b. Child and dependent care tax credit

Explanation / Answer

The amount of employment-related expense is limited to $6,000 for two or more children.

This amount must be reduced by the $1,800 that Martha receives from employer.

Thus, their allowed expenses are $4,200. Since their AGI was over $43,000, Tim and Martha are entitled to a credit to 20 % of their expenses, or $840.

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