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11 February, 07:58

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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  1. 11 February, 11:48
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    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
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