Question

Ms. Gleason, an unmarried taxpayer, had the following income items:

Salary	$	40,000
Net income from a rental house		3,200

Ms. Gleason has a four-year-old son who attends a daycare center while she is at work. Ms. Gleason paid $4,380 to this center and has no itemized deductions. Compute Child Credit, Dependent Credit, and her income tax after these two credits. Assume the taxable year is 2019.

Answer 1

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highlighted in yellow: Per Year 2019 rules: Answers are Solution: As per IRS, child and dependent care credit is from 20% to 35% of upto $3000 of one qualifying child. IF total income is more than $43,000 then 20 % credit will be applicable of maximum $3,000 per child. To qualify for child tax credit (CTC), child's age must be under 17 (e.g. 16 or younger) 2018, per child tax credit $2,000. Child Credit $ 2,000 a) Dependent care credit b) (3000*20%)= 600 Head-of-houseold: Particulars Salary Net income from a rental house Amount $ 40,000 3,200 Gross Income and AGI Less: Greater of itemized or standard deduction Taxable Income $ 43,200 $18,350 $ 24,850 (1385)+(24850-13850)*12% (2000+600) Gross Income tax 2,705 Less: Child Credit, Dependent Credit $ 2,600 Income tax after two credits $ 105