Calculate the amount of the child and dependent care credit allowed before any tax liability limitations or other credits for 2023 in each of the following cases, assuming the taxpayers had no income other than the stated amounts. TABLE 6.1 CHILD AND DEPENDENT CARE CREDIT PERCENTAGES Adjusted Gross Income Applicable Percentage Over But Not Over $0 – $15,000 35% 15,000 – 17,000 34% 17,000 – 19,000 33% 19,000 – 21,000 32% 21,000 – 23,000 31% 23,000 – 25,000 30% 25,000 – 27,000 29% 27,000 – 29,000 28% 29,000 – 31,000 27% 31,000 – 33,000 26% 33,000 – 35,000 25% 35,000 – 37,000 24% 37,000 – 39,000 23% 39,000 – 41,000 22% 41,000 – 43,000 21% 43,000 – No limit 20% Question Content Area a. William and Carla file a joint tax return. Carla earned $27,500 during the year, while William attended law school full-time for nine months and earned no income. They paid $3,500 for the care of their 3-year-old child, Carl. Round your answer to the nearest whole dollar.
To calculate the Child and Dependent Care Credit for William and Carla, we need to follow these steps: 1. **Determine the Applicable Percentage**: Based on their Adjusted Gross Income (AGI). 2. **Calculate the Qualifying Expenses**: The amount they paid for child care. 3. **Apply the Applicable Percentage to the Qualifying Expenses**. **Step 1: Determine the Applicable Percentage** - Carla's earned income is $27,500. - William attended law school full-time and earned no income. - Their AGI is $27,500. According to the table provided: - For an AGI between $27,000 and $29,000, the applicable percentage is 28%. **Step 2: Calculate the Qualifying Expenses** - They paid $3,500 for the care of their 3-year-old child, Carl. - The maximum allowable expenses for one qualifying child are $3,000. Since they paid $3,500, but the maximum allowable expenses are $3,000, we will use $3,000 for the calculation. **Step 3: Apply the Applicable Percentage to the Qualifying Expenses** - Applicable Percentage: 28% - Qualifying Expenses: $3,000 Child and Dependent Care Credit = Qualifying Expenses × Applicable Percentage Child and Dependent Care Credit = $3,000 × 28% Child and Dependent Care Credit = $3,000 × 0.28 Child
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