“ We would like to know the minimum salary we can accept for her to return to work while paying for daycare that will allow us to afford our costs of living.”---> The child care credit can be up to 35 percent of your qualifying day care expenses, depending on your income, but may not to exceed $3,000 for one child, and $6,000 for two or more children. For example, if your AGI on 1040 line 38, NOT Taxable Income, is $15,000 or LESS, then your child care credit is equal to 35% of the qualifies expenses while if your AGI is between $27,000 and $29,000 , then your child care credit is29% of the qualifies expenses. Assume that you file a joint return with your spouse, and you have one child and pay $4,000 for child care expenses; you earn $16,000 and your spouse earned $8,500 and have no tax deductions, resulting in your AGI of $24,500, then your qualified expenses is $4,000. However, maximum child care expense for one dependent(child) is $3,000. so your credit percentage is 30% as your AGI is between $23,000~$25,000 as shown on Form 2441; so, $900 child credit is allowed; $3,000( NOT $4,000)*30%=$900. As you can see, you and your spouse if you file jointly – must have earned income from wages, salaries, tips, other taxable employee compensation or net earnings from self-employment.
Please visit the IRS Website here: Ten Things to Know About the Child and Dependent Care Credit http://www.irs.gov/pub/irs-pdf/f2441.pdf
One factor involved is how much we can deduct from our taxes for child care. What can we expect for a child care deduction?”--->As said above it depends on your AGI, NOT Taxable income. For 2011, you may use up to $3,000 of expenses paid in a year for one qualifying individual As long as your AGI level is $15,000 or less, then your child care credit is 35%; So,$1,050; $3,000*35%=$1,050 for the child; if you pay $2,000 then your child care credit is $700;35%*$2,000=$700. you report the credit on 1040 line 48. As long as a household pays for child care for their children or disabled adult dependents, they may qualify for a tax credit. Tax credits differ from tax deductions in that credits directly reduce the taxes you owe, while deductions reduce the amount of income that is taxable. Parents who are "married, filing jointly" can only claim the credit if both parents are working.