$400 credit for $10,000 child care expenses?

Hi all,
I am a newbie here, in need of help.
We are using TurboTax to file our taxes this year. When we entered almost $10,000 in child care expenses we had last year, TurboTax said "we qualify for a $400 tax credit" this year. It is intriguing me that is all we will get back for our $10,000.
For a number of reasons we "forgot" to apply for flexible spending account for 2004, so we are getting nothing back there. In my mind we would have two tax breaks four our baby:
1. child care expenses
2. child tax credit
Am I wrong? Does anyone have any idea of what we are doing wrong? Is $400 really what we are supposed to get back after the $10K in child care expenses (daycare tuition)? :confused: Please help.
Thanks!!
l

Afmferreira,

Without knowing more about your AGI, it is nearly impossible to answer your question.
Please note your parents did not have either of these tax credits available when you were a child.

On our 2004 tax returns, the dependent care credit is limited to $3,000 of expenses for one dependent, and $6,000 for two or more dependents. The credit ranges from 35% with an AGI of $15K to 20% when the AGI is $43K or more.

The child tax credit is a maximum of $1,000. When our AGI exceeds $110K (mfj), the credit is reduced. IRS Pub 972 has a work sheet that is used to calculate the maximum child tax credit.

Both of these tax credits can not be greater than your tax (1040 line 45). Note the order of these tax credits are listed on the 1040 tax form. The dependent care credit can eliminate the child tax credit on 1040 line 51.

But if your child tax credit is not used, you may qualify for aditional child tax credit on 1040 line 67. This is a refundable credit and will be refunded to the taxpayer.