Question

Julie paid a day care center to watch her two-year-old son while she worked as a computer programmer for a local start-up company. What amount of child and dependent care credit can Julie claim in each of the following alternative scenarios?

1. Julie paid $6,000 to the day care center and her AGI is $50,000 (all salary). Find Child and dependent care credit

2. Julie paid $5,000 to the day care center and her AGI is $25,000 (all salary). Find Child and dependent care credit

Answer 1

There is limit of allwable expense amount in case of single child 3000 and in case of 2 childs 6000.

According to IRS , following are the ranges

Range (AGI)	% allowed
23000-25000 (includes 25000)	30%
Above 43000	20%

There are other ranges also but we are going to use these only.

1) Since she has one child expense will be limited to 3000.Based on her AGI = 50000 ,

child and dep, care credit = 3000*20% = 600

2)Based on AGI = 25000

Child and dep credit = 3000*30% = 900