Question

Your supervisor has asked you to research the following situation concerning Scott and Heather Moore. Scott and Heather are married and file a joint return. Scott works full-time as a wildlife biologist, and Heather is a full-time student enrolled at Online University. Scott’s earned income for the year is $36,000. Heather does not have a job and concentrates solely on her schoolwork. The university she is enrolled in offers courses only through the Internet. Scott and Heather have one child, Elizabeth (age 8), and pay $3,000 for child care expenses during the year.

Please explain the amount of child and dependent care credit that Scott and Heather Moore can claim.

Answer 1

The amount of child and dependent care credit that Scott and Heather Moore can claim:

According to the provisions:

• Out of the income or expenses paid only amount between 20% to 35% is allowed as child and dependent care credit.
• If in case income is below $15,000 then full credit of 35% is allowed. For every increase in income of $2,000, one percent credit decreases.

In the given case:

Income of Scott = $36,000

Child care credit that will be allowed = 24% of $36,000 or actual expense whichever is lower:

= $8,640 or $3,000 whichever is lower

= $3,000

Thus in this case Scott and Moore will be allowed credit of full amount of $3,000.