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.
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 |
|
Schedule 2 (Form 1040A) for Jerry and Ann Jones
Page 1 of Form 2441 for Joan Thomas
Page 2 of Form 2441 for Joan Thomas
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