Question

Malik is a doctor in the emergency department at Sacramento City Hospital. Malik is unmarried and has an 8-year-old daughter. In 2020, Malik's employer provided Malik with a $5,000 qualified disaster relief payment to help Malik pay for the cost of hiring a nanny when Malik's daughter's school was closed due to the Covid-19 pandemic. Malik still needed to work during this time, so it was necessary for him to secure alternate child care for his daughter. What amount of the $5,000 qualified disaster relief payment will Malik include in his 2020 gross income?

Numeric Response:

Answer 1

Dependent care benefits are provided by an employer to an employee for use in caring for dependents, such as young children or disabled family members. Dependents, according to the Internal Revenue Service (IRS), are treated as an exemption credit that may be claimed on an annual tax return. On its own, the dependent credit can reduce a filer's taxable income by thousands of dollars. A dependent care flexible spending account is available for individuals who care for a child or adult who is incapable of self-care, who lives in the taxpayer's home for at least eight hours each day, and who can be claimed as a dependent on an income tax return.

The Child and Dependent Credit is a tax credit available to taxpayers who paid for the care of their child, spouse, or dependent so they can work or look for work.taxpayers may claim up to $3,000 worth of expenses for a single dependent ($6,000 for more than one dependent).

Malik employed one dependent:-

Amount included in gross income = 5,000 - 3000 = 2,000

The Taxable income is $2,000

More than one dependent:-

If Malik employed more than one dependent then the taxable income is Zero