Question

Clark maintains a household for himself and his two dependent preschool children and files as head of household. For the year ended December 31, 2018, Clark earned a salary of $62,000. He paid $3,600 to a housekeeper to care for his children in his home, and also paid $1,500 to a kiddie play camp for child care. He had no other income or expenses during 2018. His tax liability before any credits is $5,011.

How much can Clark claim as a child and dependent care credit, child tax credit, and additional child tax credit in 2018?

Answer 1

Clark’s child and dependent credit is $1,020 (20% × ($3,600 + $1,500)) which reduces his liability to $3,991.

His child tax credit would be $4,000 ($2,000 × 2 children) but for the tax liability limitation of $3,991. However, Clark is eligible for an additional child tax credit of $9.