Explanation:

The correct answer is "are playing" because the verb "play" is in the present continuous tense. Present continuous tense is used to describe an action that is happening right now or is currently in progress.

Examples:

- I am writing this answer. (action is currently in progress)
- She is eating breakfast. (action is happening right now)

Forming Present Continuous Tense:

The present continuous tense is formed by adding the present tense of the verb "to be" (am/is/are) and the present participle (-ing) of the main verb.

Examples:

- I am playing tennis.
- He is watching TV.
- They are studying for the exam.

Using Present Continuous Tense:

The present continuous tense is used to describe an action that is happening right now, or is currently in progress. It is also used to describe an action that is planned for the future.

Examples:

- She is cooking dinner right now.
- They are playing soccer in the park.
- We are going to the movies tonight.

Conclusion:

In the given sentence, "My kids are playing in the garden now," the verb "play" is in the present continuous tense, which means the action is currently in progress. Therefore, the correct answer is "are playing."