ExamplesThe 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 ChildrenJerry 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.
Example 2. Dependent Care BenefitsJoan 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.
Schedule 2 (Form 1040A) for Jerry and Ann Jones |
