The following examples show how to figure the credit for child and
dependent care expenses. A filled-in page 1 of Schedule 2 (Form 1040A)
that illustrates Example 1 and a filled-in Form 2441 (filed
with Form 1040) that illustrates Example 2 are shown after
the examples.
Example 1.
Child Care -- Two Children
Jerry and Ann Jones are married and keep up a home for their two
preschool children, ages 2 and 4. They claim their children as
dependents and file a joint return using Form 1040A. Their adjusted
gross income (AGI) is $27,500. Jerry earned $12,500 and Ann earned
$15,000.
During the year, they pay work-related expenses of $3,000 for child
care for their son Daniel at a neighbor's home and $2,200 for child
care for their daughter Amy at Pine Street Nursery School.
They figure their credit on Schedule 2 as follows.
| Child care by neighbor |
$3,000 |
| Child care by nursery school |
+2,200 |
| Total work-related expenses |
$5,200 |
| Dollar limit |
$4,800 |
| Lesser of expenses paid
($5,200) or dollar limit
($4,800) |
$4,800 |
| Percentage for AGI of $27,500 |
21% |
| Amount of credit (21% of $4,800) |
$1,008 |
Example 2.
Dependent Care Benefits
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.
Schedule 2 - for Jerry and Ann Jones
Form 2441 Page 1 for Joan Thomas
Form 2441 Page 2 for Joan Thomas
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 |
20% |
| Amount of credit (20% of $1,800) |
$ 360 |
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