Chapter 14, Problem 27AP

Mr. and Mrs. Alexander have two dependent children. They paid $7,200 wages to a housekeeper to care for the children and $549 employer payroll tax on her wages. Mr. and Mrs. Alexander file a joint return. In each of the following cases, compute their dependent care credit.

1. a. One child is age 10, and the other is age 15. Mr. Alexander’s earned income is $75,000, and Mrs. Alexander has no earned income. Their AGI is $81,300.
2. b. One child is age 2, and the other is age 6. Mr. Alexander’s earned income is $45,000, and Mrs. Alexander’s earned income is $28,000. Their AGI is $81,300.