Question

How does the Child and Dependent Care Credit help working parents with childcare costs?

(1 point)
Responses

It reduces their final federal income tax bill.
It reduces their final federal income tax bill.

It increases their adjusted gross income yearly.
It increases their adjusted gross income yearly.

It gives them a direct cash payment monthly.
It gives them a direct cash payment monthly.

It makes all childcare payments tax-deductible.
It makes all childcare payments tax-deductible.

Answer 1

It reduces their final federal income tax bill.

Explanation: The Child and Dependent Care Credit is a tax credit based on qualifying childcare expenses, which lowers the amount of federal income tax owed (subject to limits). It is not a deduction of AGI, a monthly cash payment, nor does it make all childcare payments tax-deductible.