Sean and Jenny are married, file a joint return and have two dependent children, Blake, age 9 and Jake, age 5. Sean has earned income of $72,000. Jenny was a full-time student (for nine months) with no income. They paid a qualified day care center $7,000. What amount of child and dependent care credit can Sean and Jenny receive?
a. 600
b. 900
c. 1000
d. 1200
is it d
To determine the amount of child and dependent care credit that Sean and Jenny can receive, we need to follow a few steps:
1. The first step is to calculate the earned income limit. The maximum eligible expenses for one child is $3,000, or $6,000 for two or more children. In this case, since Sean and Jenny have two children, we can use $6,000 as the maximum limit.
2. The second step is to calculate the percentage of expenses that can be claimed as a credit. The credit is calculated based on a percentage of the expenses, with the percentage decreasing as the income increases. For this example, if the household's adjusted gross income (AGI) is less than $15,000, the credit rate is 35%. If the AGI is between $15,000 and $43,000, the credit rate gradually decreases from 35% to 20%. In this case, the AGI is $72,000, so the credit rate would be 20%.
3. Finally, we can calculate the child and dependent care credit using the formula: eligible expenses * credit rate. In this case, the eligible expenses are $6,000 (maximum limit) and the credit rate is 20%. Therefore, the credit amount would be $6,000 * 0.20 = $1,200.
Therefore, the correct answer is d. $1,200.