In each of the following independent situations, determine the amount of the child and dependent care tax credit. (Assume that both taxpayers are employed and the year is 2015).
a. Brad and Bonnie are married and file a joint return, with earned income of $40,000 and $14,000, respectively. Their combined AGI is $52,000. They have two children, ages 10 and 12, and employ a live-in nanny at an annual cost of $9,000.
b. Assume the same facts as in Part a, except that Brad and Bonnie employ Bonnie’s mother, who is not their dependent, as the live-in nanny.
c. Bruce is divorced and has two children, ages 10 and 16. He has AGI and earned income of $27,000. Bruce incurs qualifying child care expenses of $8,000 during the year, incurred equally for both children. Bruce’s employer maintains an employee dependent care assistance program. $1,000 was paid to Bruce from this program and excluded from Bruce’s gross income.
d. Buddy and Candice are married and file a joint return. Their combined AGI is $50,000. Buddy earns $46,000, and Candice’s salary from a part-time job is $4,000. They incur $5,000 of qualifying child care expenses for a day-care facility for their two children, ages 2 and 4.
e. Ben and Bunny are married and file a joint return. Their AGI is $75,000, all earned by Bunny. Ben was a full-time student for two semesters (10 months) at State University during the year. They incur $7,000 of qualifying child care expenses for their two children, ages 6 and 4.