Question

Rachel is Emma’s friend. Rachel provides child care for Emma's two dependent children, ages 4 and 7, during the day so Emma can go to work. During 2020, Emma paid Rachel $8,000 to care for her two children. What is the amount of Emma's child and dependent care tax credit in 2020 if her adjusted gross income for the year was $42,000, consisting of $38,000 of wages and $4,000 of interest income?

Answer 1

Child and Dependent care tax credit

In this case Emma can claim credit because payment is made to Rachel who is friend of Emma, and the Rachel is

-not the Parent of dependent child ,

-not the child of Emma

-not the spouce of Emma

Therefore this condition is satisfied by Emma

Another condition is

Credit can be claimed up the age of 13 years of the dependent child up to the amount of $6000 of expenses for two or more dependent child

Emma have two dependent children, ages 4 and 7

So this condition also satisfied

However maximum credit allowed is depend upon Income earned and return filled as single return or Joint fillers.

If the adjusted earnings

Dependent childrens	Credit allowed	Earned income in case of Single return
2	$5920	$47440

In this case Emmas adjusted income is $42000 and having two childs. Therefore Emma can claim credit of $5920 of expenses paid. Provided that Emma required to file return