Question

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 Eastside Pre-School for a total cost of $3,000. Ervin, who is nine, attended Big Kid Daycare after school at a cost of $2,000. 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?

Answer 1

According to 2016, Child and Dependent care credit, the credit can be taken for children or dependent only upto the age of 13. In the given case, as all the three children are less than 13 years of age, hence all are eligible or covered under the credit scheme.

Next, according to rules, the amount that can be claimed for one dependent is $3,000 and for two or more dependent, the amount is restricted to a maximum of $6,000. In the given case, amount spent on two youngest children is $3,000 while amount spent on the oldest child is $2,000. Hence the total amount of $5,000 can be used to determine the child and dependent care credit.

In the given case, the total income of Jenny and Kevin is $29,000 which is more than $5,000. Hence, the complete amount of $5,000 can be used to determine the Child and dependent care credit. If say, the total income of Jerry and Kevin would have been less than $5,000 then the amount to be used for child and dependent care credit would have been lower of amount earned or amount spend on child education.