Publication 503 - Child And Dependent Care Expenses - 2002 Page 15
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22Example 2.
Examples
Dependent Care Benefits
The following examples show how to figure the credit for
Joan Thomas is divorced and has two children, ages 3 and
child and dependent care expenses. A filled-in page 1 of
9. She works at ACME Computers. Her adjusted gross
Schedule 2 (Form 1040A) that illustrates Example 1 and a
income (AGI) is $29,000, and the entire amount is earned
filled-in Form 2441 (filed with Form 1040) that illustrates
income.
Example 2 are shown after the examples.
Joan’s younger child (Susan) stays at her employer’s
on-site child-care center while she works. The benefits
Example 1.
from this child-care center qualify to be excluded from her
income. Her employer reports the value of this service as
Child Care — Two Children
$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.
Jerry and Ann Jones are married and keep up a home for
A neighbor cares for Joan’s older child (Seth) after
their two preschool children, ages 2 and 4. They claim their
school, on holidays, and during the summer. She pays her
children as dependents and file a joint return using Form
neighbor $2,400 for this care.
1040A. Their adjusted gross income (AGI) is $27,500.
Joan figures her credit on Form 2441 as follows.
Jerry earned $12,500 and Ann earned $15,000.
During the year, they pay work-related expenses of
1)
Work-related expenses Joan paid . . . . . . . . . . . . . $
2,400
$3,000 for child care for their son Daniel at a neighbor’s
2)
Dollar limit (2 or more qualified individuals) . . . . . . . $
4,800
home and $2,200 for child care for their daughter Amy at
3)
Minus: Dependent care benefits excluded from Joan’s
−3,000
income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pine Street Nursery School.
4)
Reduced dollar limit . . . . . . . . . . . . . . . . . . . . . . . $
1,800
They figure their credit on Schedule 2 as follows.
5)
Lesser of expenses paid ($2,400) or dollar limit
($1,800) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,800
1)
Child care provided by their neighbor . . . . . . . . . . . $
3,000
6)
Percentage for AGI of $29,000 . . . . . . . . . . . . . . . .
20%(.20)
2)
Child care provided by the nursery school . . . . . . . .
+2,200
7)
Multiply the amount on line 5 by the percentage
3)
Total work-related expenses . . . . . . . . . . . . . . . . . $
5,200
amount on line 6 . . . . . . . . . . . . . . . . . . . . . . . . . $
360
4)
Dollar limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,800
8)
Enter the amount from Form 1040, line 44 . . . . . . . . $
1,469
5)
Lesser of expenses paid ($5,200) or dollar limit
−0−
9)
Enter any amount from Form 1040, line 45 . . . . . . .
($4,800) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,800
10)
Subtract line 9 from line 8 . . . . . . . . . . . . . . . . . . . $
1,469
6)
Percentage for AGI of $27,500 . . . . . . . . . . . . . . .
21%(.21)
11)
Credit
7)
Multiply the amount on line 5 by the percentage on
(Enter the smaller of line 7 or line 10) . . . . . . . . . . . $
360
line 6 ($4,800 x .21) . . . . . . . . . . . . . . . . . . . . . . $
1,008
8)
Enter the amount from line 28 of Form 1040A . . . . . $
768
9)
Credit
(Enter the smaller of line 7 or line 8) . . . . . . . . . . . $
768
The amount of credit they can claim is limited to their
tax, $768.
Page 15
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