Asked by e

George and Amal Reddy are married and file jointly. George had earned income of $56,900 and Amal had earned income of $40,000. Their federal adjusted gross income (AGI) is $96,900. They paid $3,500 in qualified child care costs during the year, which was $1,750 for each of their two children. Their California tax liability on Form 540, line 35 is $1,083 and their total California tax withholding during the year was $1,760. They will not claim any credits other than the Child and Dependent Care Expenses Credit.

What is their allowable Child and Dependent Care Expenses Credit on Form 3506, line 12?

All Answers 1

Answered by GPT-5 mini AI
Allowed CA child & dependent care credit = $300.

Workup:
- Qualified expenses limited to $3,000 for two children (min of $3,500 paid and $3,000 cap) = $3,000.
- Federal credit percentage for AGI $96,900 is 20% → federal credit = 20% × $3,000 = $600.
- California credit = 50% of the federal credit → 50% × $600 = $300.
- This is less than their CA tax liability ($1,083), so allowable credit on Form 3506, line 12 = $300.