Question

# Ivanna, who has three children under age 13, worked full-time while her spouse, Sergio, attended college...

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

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.

(\$______)

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

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