To determine Janelle's Child and Dependent Care Credit based on the $5,000 of employer-paid dependent care benefits reported in Box 10 of her W-2, we need to follow these steps:
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Understand the limit on qualifying expenses: The IRS allows a maximum of $3,000 in qualifying expenses per child for one child or up to $6,000 for two or more children for the Child and Dependent Care Credit.
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Consider the employer-paid dependent care benefits: The amount of employer-paid benefits is generally excluded from taxable income up to a certain amount. In Janelle’s case, she has $5,000 reported in Box 10. Only the amount above the exclusion limits can be considered for the credit.
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Exclusion Limit: If Janelle has one child, the exclusion limit is $3,000, and if she has two or more children, it is up to $6,000.
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Calculation of Credit: The Child and Dependent Care Credit is based on a percentage of qualifying expenses. The percentage can range from 20% to 35% depending on the taxpayer's adjusted gross income (AGI).
In summary, if Janelle has only one child, she can only claim $3,000 for the credit, and if she has two or more children, she can claim up to $6,000.
Assuming Janelle has one child, her Child and Dependent Care Credit would be calculated as follows:
- Qualifying expense limit = $3,000
- Credit rate = Depending on income, let's assume a common rate of 20% (for simplicity, but it could be higher based on AGI).
So, if Janelle has one child:
- Credit = $3,000 x 20% = $600
If she has two or more children:
- Credit = $6,000 x 20% = $1,200
In conclusion, without additional information on her income and the number of children, we cannot determine the exact credit amount, but those are the boundaries and the calculation based on the $5,000.
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