Question

Ivanna, who has three children under age 13, worked full-time while her spouse, Sergio, attended college for nine months during the year. Ivanna earned $44,100, and the couple incurred $8,625 of child care expenses.

Child and Dependent Care Credit Computations

Adjusted Gross Income
Over	But Not Over	Applicable Rate of Credit
$    0	$15,000	35%
15,000	17,000	34%
17,000	19,000	33%
19,000	21,000	32%
21,000	23,000	31%
23,000	25,000	30%
25,000	27,000	29%
27,000	29,000	28%
29,000	31,000	27%
31,000	33,000	26%
33,000	35,000	25%
35,000	37,000	24%
37,000	39,000	23%
39,000	41,000	22%
41,000	43,000	21%
43,000	No limit	20%

Determine Ivanna and Sergio's child and dependent care credit.

($______)

Answer 1

Credit amount = eligible care costs * applicable percentage

TThe qualifying cost for child care credit is lesser of actual cost or $3,000 for one child and $6,000 for two or more or the earned income of the lowest paid taxpayer

Actual cost = 8625

credit limit = $6000

Total earnings of Sergio = $4500 (As Sergio is assumed to be a full-time and is his earning being $500 per month. Therefore, 500*9 = $4500)

Therefore eligible care costs = $4500

AGI being above $43000, they fall in the category of 20%

Thus,

Ivanna and Sergio's child and dependent care credit = 4500*20% = $900