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Taxmap/pubs/p503-004.htm#TXMP2300a28d Examples

Examples

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.

Taxmap/pubs/p503-004.htm#TXMP19c787f0 Example 1.   Childcare — 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 childcare for their son Daniel at a neighbor's home and $3,200 for childcare for their daughter Amy at Pine Street Nursery School.

They figure their credit on Schedule 2 as follows.

1)		Childcare provided by their neighbor	$		3,000
2)		Childcare provided by the nursery school			+3,200
3)		Total work-related expenses	$		6,200
4)		Dollar limit	$		6,000
5)		Lesser of expenses paid ($6,200) or dollar limit ($6,000)	$		6,000
6)		Percentage for AGI of $27,500 (28%)			.28
7)		Multiply the amount on line 5 by the percentage on line 6 ($6,000 x .28)	$		1,680
8)		Enter the amount from line 28 of Form 1040A	$		543
9)		Enter the amount from line 11 of Schedule 2 (Form 1040A)	$		0
10)		Subtract the amount on line 9 from the amount on line 8	$		543
11)		Credit (Enter the smaller of line 7 or line 10)	$		543

The amount of credit they can claim is limited to their tax, $543.

Taxmap/pubs/p503-004.htm#TXMP1c692c4a 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 childcare center while she works. The benefits from this childcare 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 on her Form W-2 in box 10, 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.

1)		Work-related expenses Joan paid	$	2,400
2)		Dollar limit (2 or more qualified individuals)	$	6,000
3)		Minus: Dependent care benefits excluded from Joan's income		- 3,000
4)		Reduced dollar limit	$	3,000
5)		Lesser of expenses paid ($2,400) or dollar limit ($3,000)	$	2,400
6)		Percentage for AGI of $29,000 (28%)		.28
7)		Multiply the amount on line 5 by the percentage on line 6 ($2,400 x .28)	$	672
8)		Enter the amount from Form 1040, line 45	$	1,376
9)		Enter the amount from Form 1040, line 46	$	0
10)		Subtract line 9 from line 8	$	1,376
11)		Credit (Enter the smaller of line 7 or line 10)	$	672

Taxmap/pubs/p503-004.htm#TXMP7a86cb05

Schedule 2 (Form 1040A) for Jerry and Ann Jones  

Taxmap/pubs/p503-004.htm#TXMP7fc9dd80

Page 1 of Form 2441 for Joan Thomas  

Taxmap/pubs/p503-004.htm#TXMP7e0bb7b7

Page 2 of Form 2441 for Joan Thomas  

Previous Page:  Publication 503 - Child and Dependent Care Expenses - Employment Taxes for Household Employers Next Page:  Publication 503 - Child and Dependent Care Expenses - How To Get Tax Help Use     to find additional instances of index items.