Which of the following statements about the child and dependent care credit is correct?
a. The maximum credit is $600.
b. The credit is nonrefundable.
c. The child must be under the age of 18 years.
d. The child must be a direct descendant of the taxpayer.
Explanation
Choice "b" is correct. The child and dependent care credit is nonrefundable. The only refundable credits are the child tax credit (which is a different credit with a similar name), the earned income credit, withholding taxes, portions of the Hope Scholarship credit, and excess Social Security taxes paid. The child and dependent care credit is a "personal" tax credit.
Choice "c" is incorrect. The child must be under age 13, not age 18, to be a qualifying child and for there to be a credit.
Choice "d" is incorrect. The child need not be a direct descendant of the taxpayer for there to be a credit. To be a qualifying child, the child must merely be a dependent of the taxpayer.
Choice "a" is incorrect. The maximum child and dependent care credit is 35% of eligible expenses, with a phase out for AGI over $15,000. There is no pure $600 limit.
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