taxmap/pub17/p17-173.htm#en_us_publink100034922The following example shows how to figure the credit for child and dependent care expenses for two children when employer-provided dependent care benefits are involved. The filled-in draft
Form 2441 is shown at the end of this chapter.
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. Joan pays her neighbor $2,400 for this care.
Joan figures her credit on Form 2441 as follows.
| 1) | | Work-related expenses Joan paid | $ | 2,400 |
| 2) | | Dollar limit (2 or more qualified individuals) | $ | 6,000 |
| 3) | | Minus: Dependent care benefits excluded from Joan's income | | -3,000 |
| 4) | | Reduced dollar limit | $ | 3,000 |
| 5) | | Lesser of expenses paid ($2,400) or dollar limit ($3,000) | $ | 2,400 |
| 6) | | Percentage for AGI of $29,000 (28%) | | .28 |
| 7) | | Multiply the amount on line 5 by the percentage on line 6 ($2,400 x .28) | $ | 672 |
| 8) | | Enter the amount from Form 1040, line 46 | $ | 1,053 |
| 9) | | Enter the amount from Form 1040, line 47 | | 0 |
| 10) | | Subtract line 9 from line 8 | $ | 1,053 |
| 11) | | Credit (Enter the smaller of line 7 or line 10) | $ | 672 |
Previous Page: Publication 17 - Your Federal Income Tax - Employment Taxes for Household Employers
Next Page: Publication 17 - Your Federal Income Tax - Credit for the Elderly or the Disabled
Form 2441 Child and Dependent Care Expenses 