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Paul and Karen Kent are married, and both are employed (Paul earned $44,000 and Karen earned $9,000 this year). Paul and Karen have two dependent children, Samuel and Joy, both under the age of 13. Paul and Karen pay $3,800 ($1,900 for each child) to Sunnyside D Care Center (422 Sycamore Road, Ft. Worth, TX 76028; Employer Identification Number 11-2345678), to care for their children
Assuming that Paul and Karen file a joint return, their tax credit for child and dependent care expenses for the year is ________.

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Answer:

$760

Explanation:

The tax credit for child and dependent care expenses allows working taxpayers to discount up to 35% of care expenses. The exact percentage that you are allowed to deduct depends on your income:

  • if you earn up to $15,000, you can discount 35% of dependent care expenses of up to $3,000 per child.
  • the percentage decreases for every $2,000 of income (1% decrease per every $2,000), until your income reaches $43,000 where it remains at 20%.

The Kent's earned $53,000 during the year, so they can claim up to 20% of their children's care expenses = $3,800 x 20% = $760

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