Question

During the year, a married couple pays $3,500 in qualified childcare expenses to a nanny to look after their 8-year-old son. The husband works and has $56,000 of wages during the year; the wife attended college as a full-time student for 10 months of the year. Based on the couple's AGI, the percentage they can use to compute their child and dependent care credit is 26%. The couple's child and dependent care credit is:a. $910.b. $780.c. $650.d. $1,000.e. $0.

Answer 1

The couple's child and dependent care credit is;

a. $910

Step-by-step explanation:

The amount of dependent care credit is calculated based on the amount of expenses the couple spent on childcare. This can be expressed as;

C=T×E

where;

C=Child care credit

T=tax

E=childcare expenses

In our case;

C=unknown

T=26%=26/100=0.26

E=$3,500

This can be written as;

Child care credit=tax×child care expenses

replacing;

C=0.26×3,500=$910

The couple's child and dependent care credit=$910