During the year, a married couple pays $3,500 in qualified childcare expenses to a nanny to look after their 8-year-old son. The husband works and has $56,000 of wages during the year; the wife attended college as a full-time student for 10 months of the year. Based on the couple's AGI, the percentage they can use to compute their child and dependent care credit is 26%. The couple's child and dependent care credit is:a. $910. b. $780. c. $650. d. $1,000. e. $0.

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Business

Harold Lozano

16 January, 14:33

During the year, a married couple pays $3,500 in qualified childcare expenses to a nanny to look after their 8-year-old son. The husband works and has $56,000 of wages during the year; the wife attended college as a full-time student for 10 months of the year. Based on the couple's AGI, the percentage they can use to compute their child and dependent care credit is 26%. The couple's child and dependent care credit is:a. $910. b. $780. c. $650. d. $1,000. e. $0.

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Oren · Answer 1

The couple's child and dependent care credit is;

a. $910

Explanation:

The amount of dependent care credit is calculated based on the amount of expenses the couple spent on childcare. This can be expressed as;

C=T*E

where;

C=Child care credit

T=tax

E=childcare expenses

In our case;

C=unknown

T=26%=26/100=0.26

E=$3,500

This can be written as;

Child care credit=tax*child care expenses

replacing;

C=0.26*3,500=$910

The couple's child and dependent care credit=$910