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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