Registered Tax Return Preparer RTRP Practice Exam 2026 - Free Tax Return Preparation Practice Questions and Study Guide

The correct answer is indeed that the percentage range of expenses eligible for the Child and Dependent Care Credit is between 20-35%. This credit is designed to assist families with the costs of care for children under age 13, as well as for dependents who are physically or mentally incapable of self-care.

The percentage at which the credit is calculated depends on the taxpayer's income level. Generally, lower-income taxpayers can claim a higher percentage of their eligible expenses than those with higher incomes. Specifically, taxpayers with the lowest income can claim up to 35% of their qualifying expenses, while the percentage gradually decreases as income rises, reaching 20% at higher income levels.

Understanding this percentage range is crucial for tax preparers to ensure they are correctly advising clients on potential credits they may qualify for, as it can significantly impact their overall tax liability.