Kobe is a single dad with two dependent children, Lizzie, age 7 and Leslie, age 3. He has AGI of $51,000 and paid $6,300 to a qualified day care center. What amount of credit can Kobe receive for the child and dependent care credit?
A. $600
B. $1,200
C. $1,260
D. $6,300
is it D
Kobe AGI is 51,000 which means he gets a 20% tax credit(according to the tax credit% chart). Which means 6,300 times 20%. The answer is C. $1,260.
No, it is not option D. To calculate the child and dependent care credit, we need to consider the following criteria:
1. The maximum amount of eligible expenses is $3,000 for one child or $6,000 for two or more children.
2. The credit percentage is between 20% and 35%, depending on the taxpayer's AGI.
In this case, Kobe has paid $6,300 to a qualified day care center for the care of his two dependent children. Since Kobe is a single dad with an AGI of $51,000, we need to determine the credit percentage based on his AGI.
According to the IRS guidelines for 2020, if Kobe's AGI is above $15,000, but not more than $43,000, the credit percentage would be 20%. However, if his AGI is over $43,000, the credit percentage would be reduced by 1% for each $2,000 (or fraction thereof) above $15,000. So, since Kobe's AGI is $51,000, his credit percentage would be reduced by 8% (4 x 2%) for a final credit percentage of 12%.
Now, let's calculate the credit amount based on this information:
For two or more children, the maximum eligible expense is $6,000. Therefore, Kobe can only claim up to $6,000 as eligible expenses, even though he paid $6,300.
Credit amount = eligible expenses x credit percentage
Credit amount = $6,000 x 12% = $720
Therefore, the correct answer is not listed among the choices provided. The correct answer for the child and dependent care credit Kobe can receive would be $720.
No, it is not option D ($6,300). To determine the amount of the child and dependent care credit, we need to follow a specific formula and consider certain factors.
First, we need to find the applicable percentage based on the taxpayer's adjusted gross income (AGI). In this case, Kobe's AGI is $51,000.
For taxpayers with an AGI between $15,000 and $43,000, the applicable percentage is 20% to 35%. To calculate the applicable percentage for Kobe, we use the following formula:
Applicable percentage = (AGI - $15,000) x 1.67%
Applicable percentage = ($51,000 - $15,000) x 1.67%
= $36,000 x 1.67%
= $600
Since Kobe's AGI falls within this range, the applicable percentage is 20%.
The next step is to determine the allowable expenses. In this case, Kobe paid $6,300 to a qualified day care center.
Now, we can calculate the child and dependent care credit using the following formula:
Credit = Applicable percentage x Allowable expenses
Credit = 20% x $6,300
= $1,260
Therefore, the correct answer is option C: $1,260.