Question

Child and Dependent Care Credit:

a. Trudy is Jocelyn's friend. Trudy looks after Jocelyn's four-year-old son during the day so Jocelyn can go to work. During the year, Jocelyn paid Trudy $4,000 to care for her son. What is the amount of Jocelyn's child and dependent care credit if her AGI for the year was $30,000?

b. Assume the same facts, except that Trudy is Jocelyn’s daughter who is 21 and is not claimed as a dependent by Jocelyn.

c. Heather and Mike are married. They have one daughter who is five years-old. Their total AGI for the year is $75,000. Heather works full-time and earned $70,000 in salary. Mike works part-time and earned $2,500 in wages. They paid $3,500 to a daycare for their daughter.

d. Tom has two sons ages 6 and 14 that lived with him for all of 2020. The 14 year-old has a severe mental disability that prevents the son for caring for himself. Tom paid $10,000 for the year to a professional care provider to care for his sons at Tom’s house. Tom’s AGI for the year is $100,000 Show work and Explain Answer

Answer 1

a) Amount of Jocelyn's child and dependant care credit will be limited to $ 3,000 since it is for one qualifying individual.

b) Since Trudy is over the age of 19 and is not claimed as a dependent by Jocelyn, Jocelyn will be eligible to claim a child and dependant care credit of $ 3,000.

c) Amount of child and dependant care credit will be limited to $ 3,000 since it is for one qualifying individual.

d) An individual who was physically or mentally incapable of self care, lived with you for more than half of the year and was your dependant, in this case Tom's 14 year old son will be treated as a qualifying individual. Since the child and dependant care credit is limited to $ 6,000 for two or more qualifying individuals, Tom will be eligible for a credit of $ 6,000.