Question

Trudy is Jocelyn's friend. Trudy looks after Jocelyn's four-year-old son during the day so Jocelyn can go to work. During the year, Jocelyn paid Trudy $4,010 to care for her son. What is the amount of Jocelyn's child and dependent care credit if her AGI for the year was $30,100?

McGraw-hill essential of federal taxation 2019 ed

Answer 1

Child and dependent care credit is certain percentage of qualifying care expenses based on the adjusted gross income. The maximum qualifying amount of daycare expenses is $3,000 per qualifying person. In this case, Jocelyn had paid $4,010 to Trudy for care of her son and hence, the qualifying amount of care expenses will be $3,000.

Since, AGI for the year is $30,100, the child and dependent care credit will be 27% of the qualifying care expenses i.e. $3,000 * 27% = $810.