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Home
Tax
Accounting
Payroll &
Benefits
Public Companies
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Example 1
Jerry and Ann Jones are
married and keep up a home
for their two preschool
children, ages 2 and 4. They
claim their children as
dependents and file a joint
return using Form 1040A.
Their adjusted gross income
(AGI) is $27,500. Jerry
earned $12,500 and Ann
earned $15,000. During the
year, they pay work-related
expenses of $3,000 for
childcare for their son
Daniel at a neighbor's home
and $3,200 for childcare for
their daughter Amy at Pine
Street Nursery School.
They figure their credit on
Schedule 2 as follows.
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1)
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Childcare provided
by their neighbor
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$
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3,000
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2)
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Childcare provided
by the nursery
school
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+ |
3,200
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3)
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Total
work-related
expenses
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$
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6,200
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4)
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Dollar limit
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$
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6,000
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5)
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Lesser of expenses
paid ($6,200) or
dollar limit
($6,000)
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$
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6,000
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6)
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Percentage for AGI
of $27,500 (28%)
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X |
.28
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7)
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Multiply the amount
on line 5 by the
percentage on line 6
($6,000 x .28) - the
amount of potential
credit
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$
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1,680
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Example 2
Joan Thomas is divorced and
has two children, ages 3 and
9. She works at ACME
Computers. Her adjusted
gross income (AGI) is
$29,000, and the entire
amount is earned income.
Joan's younger child (Susan)
stays at her employer's
on-site childcare center
while she works. The
benefits from this childcare
center qualify to be
excluded from her income.
Her employer reports the
value of this service as
$3,000 for the year. This
$3,000 is shown on her Form
W-2 in box 10, but is not
included in taxable wages in
box 1.
A neighbor cares for Joan's
older child (Seth) after
school, on holidays, and
during the summer. She pays
her neighbor $2,400 for this
care. Joan figures her
credit on Form 2441 as
follows.
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1)
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Work-related
expenses Joan paid
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$
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2,400
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2)
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Dollar limit (2 or
more qualified
individuals)
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$
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6,000
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3)
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Minus: Dependent
care benefits
excluded from Joan's
income
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-3,000
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4)
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Reduced dollar limit
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$
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3,000
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5)
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Lesser of expenses
paid ($2,400) or
dollar limit
($3,000)
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$
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2,400
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6)
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Percentage for AGI
of $29,000 (28%)
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X |
.28
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7)
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Multiply the amount
on line 5 by the
percentage on line 6
($2,400 x .28) -
amount of potential
credit |
$
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672
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Back to:
Child and dependent care
credit index
Other sections to read about
child care credit:
Child and
Dependant Care Credit,
Qualifying
Person Test,
Earned Income Test,
Qualified Expenses,
Child and Dependent care expenses -
examples
From IRS Pub. 503
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