IRS Tax Forms  
Publication 17 2000 Tax Year

Example

The following example shows how to figure the credit for child and dependent care expenses for two children when employer dependent care benefits are involved. The filled-in Form 2441 is shown at the end of this chapter.

Illustrated example. 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 child-care center while she works. The benefits from this child-care 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 in box 10 of her Form W-2, 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.

Work-related expenses Joan paid $2,400
Dollar limit $4,800
Minus: Dependent care benefits excluded from Joan’s income −3,000
Reduced dollar limit $1,800
Lesser of expenses paid ($2,400) or dollar limit ($1,800) $1,800
Percentage for AGI of $29,000 x .20
Amount of credit (20% of $1,800) $ 360

Form 2441, Page 1 Form 2441, Page 2

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