Question

1.Trey has two dependents, his two daughters, ages 14 and 17, at year-end. Trey files a joint return with his wife. What amount of child credit will Trey be able to claim for his daughters if his AGI is $422,000.

2.Trey has two dependents, his two daughters, ages 10 and 12, at year-end. Trey files a joint return with his wife. What amount of child credit will Trey be able to claim for his daughters if his AGI is $423,000.

3.Julie paid a day care center to watch her two-year old son this year while she worked as a computer programmer for a local start-up company. Julie paid $2,300 to the day care center and her AGI is $50,000 (all salary). What amount of child and dependent care credit can Julie claim?

4.Julie paid a day care center to watch her two-year old son this year while she worked as a computer programmer for a local start-up company. Julie paid $3,600 to the day care center and her AGI is $25,000 (all salary). What amount of child and dependent care credit can Julie claim?

Answer 1

1. Child Credit is $2,000 per eligible dependent child. Trey can only claim child credit for one dependent child of age 14. This is because to be eligible for child credit, the dependant child should be aged 16 or lower. Further since the AGI of the Treys is higher than $400,000 there will be phase out of $50 for every $1,000 over the limit of $400,000

Phase out count = $22,000 / $1,000 = 22

Reduction amount = $50 x 22 = $1,100

Child credit = $2,000 - $1,100 = $900

2. Child Credit is $2,000 per eligible dependent child. Since the AGI of the Treys is higher than $400,000 there will be phase out of $50 for every $1,000 over the limit of $400,000

Phase out count = $23,000 / $1,000 = 23

Reduction amount = $50 x 23 = $1,150

Child credit = ($2,000 x 2) - $1,150 = $2,850

3) Julie can claim a credit of percentage of her expense on day care based on gross income. The qualified expense is limited to $3,000. Since AGI is higher than $43,000 the rate is 20%.

child and dependent care credit = $2,300 x 20% = $460

4) Julie can claim a credit of percentage of her expense on day care based on gross income. The qualified expense is limited to $3,000. Since AGI is higher than $25,000 the rate is 30%.

child and dependent care credit = $3,000 x 30% = $900