Susan Beale is a single mother with two children, ages three and six. She pays a

Q: Susan Beale is a single mother with two children, ages three and six. She pays a

Solution: Susan is entitled to a child care credit of $400 ($2,000 × 20%). Her qualifying child care expenditure is $6,000 ($3,000 per child). Her employer reimbursed her $4,000 so she has unreimbursed qualifying expenses of $2,000.

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Question

Susan Beale is a single mother with two children, ages three and six. She pays a total of $7,000 each year to a neighbor to care for her children while she works. Her employer reimburses $4,000 of this amount. Before considering the child care payments and reimbursement, her adjusted gross income is $44,000 and her taxable income is $36,000. Assuming that Susan files as a head of household, how should she report the child care payments and any allowable child care credit? (Hint: Complete the Form 2441 for Susan.)

From the book Contemporary Tax Practice 3rd Ed.

Explanation / Answer

Solution:

Susan is entitled to a child care credit of $400 ($2,000 × 20%). Her qualifying child care expenditure is $6,000 ($3,000 per child). Her employer reimbursed her $4,000 so she has unreimbursed qualifying expenses of $2,000.

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Susan Beale is a single mother with two children, ages three and six. She pays a

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