In 2017 Velmas earned income was 18000 and she had no other

In 2017 Velma’s earned income was $18,000 and she had no other income. She has no other credits and her tax form 1040, line 47 is $650. She paid $3000 to wee care to care for her 1 year old daughter while she worked. She received $2000 from social services to help with her child care expenses. The percentage from form 2441 for her AGI is 33%. What is Velma’s child and dependent car credit.

Solution

Velma’s child and dependent car credit is 33% of AGI but the maximum limit is upto $3000 for one child.

Velma’s child and dependent car credit = AGI *33%

AGI = 18000-3000 +2000 = 17000

Velma’s child and dependent car credit = 17000*33% = 5610

but the maximum limit for one child is 3000

therefore, Velma’s child and dependent car credit = $3000