Homework SourseKevin and Jenny who are both working fulltime have three chi
Kevin and Jenny, who are both working full-time, have three children all under the age of ten. The two youngest children, who are three and five years old, attended pre-school for a total cost of $3000. Ervin, who is nine, attended daycare after school at a cost of $2000. Jenny has earned income of $15,000 and Kevin earns $14,000. What amount of childcare expenses should be used to determine the child and dependent care credit?
Kevin and Jenny, who are both working full-time, have three children all under the age of ten. The two youngest children, who are three and five years old, attended pre-school for a total cost of $3000. Ervin, who is nine, attended daycare after school at a cost of $2000. Jenny has earned income of $15,000 and Kevin earns $14,000. What amount of childcare expenses should be used to determine the child and dependent care credit?
Kevin and Jenny, who are both working full-time, have three children all under the age of ten. The two youngest children, who are three and five years old, attended pre-school for a total cost of $3000. Ervin, who is nine, attended daycare after school at a cost of $2000. Jenny has earned income of $15,000 and Kevin earns $14,000. What amount of childcare expenses should be used to determine the child and dependent care credit?
Solution
Expenses of children below 13 years which includes day care, nursery or home of baby sitter is eligible expenses subject to 3000 for 1 child and 6000 for 2 or more child.
Credit base is calculated as follows:
Credit Base = Lesser of Actual Qualified Expenses and ($3,000 for 1 Dependent or $6,000 for 2 or more – Tax-Free Employer Reimbursements)
So present case total expenses are 3000+2000 = 5000 or 6000, lesser is 5000.
So eligible expenses is $5000, subject to employer reimbursement which is 0.
