Tax help-please educate me

[Anonymous]

Anonymous wrote:Childcare credit is crap it should be unlimited

On the contrary, it should be eliminated entirely.

[Anonymous]

Anonymous wrote:Right, I was just noting it was a tax credit and not a deduction

Your use of "just" implied you incorrectly thought that deduction > credit.

[Anonymous]

9:38 here. Following up.

Also, asking someone "do you understand the difference between a tax credit and a tax deduction" isn't a snarky question. It's a sincere one since many people really do NOT understand the difference. And it's important that you do if you're going to try to make these calculations.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Childcare credit is crap it should be unlimited

On the contrary, it should be eliminated entirely.

Thanks, SAHM. Go back to posting on the threads about how only terrible mommies would leave their precious snowflake in care of a total stranger. (And then wonder why 4yo DD just stands there and cries while the other kids happily play soccer.)

[Anonymous]

Anonymous wrote:

Anonymous wrote:Right, I was just noting it was a tax credit and not a deduction

Your use of "just" implied you incorrectly thought that deduction > credit.

9:38 here. I didn't get that at all.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Childcare credit is crap it should be unlimited

On the contrary, it should be eliminated entirely.

Thanks, SAHM. Go back to posting on the threads about how only terrible mommies would leave their precious snowflake in care of a total stranger. (And then wonder why 4yo DD just stands there and cries while the other kids happily play soccer.)

Um. I'm a WOHD, but you just go on with your miserable existence. If child care is too expensive for you, get a better-paying job.

[Anonymous]

Anonymous wrote:OP, if you used a pre-tax savings account for childcare expenses, you can't use the tax credit being discussed. It's one or the other. If you have the option to use a pre-tax savings account in the future, it would probably save you more money than the tax credit at your income level.

Different poster. Can you help me think through those two options?

Option A: Take advantage of the Childcare Credit. Assuming we earn enough to suffer the max phase-out, we get a tax credit of about $1,200 for 2+ children.

Option B: Use a pre-tax flex spending account for childcare. We can use up to $5,000 total in the flex account, in pre tax dollars. We're in the 35% bracket, so we'd essentially be avoiding $1,750 in taxes with the flex account.

Is that generally correct?

[Anonymous]

Anonymous wrote:It's not a matter of technical terminology, pp. Yo make it sound like there's a negligible difference, when in fact there is a material one. If you have a $100 tax credit, you save $100 in taxes. If you have a $100 tax deduction, you save maybe $25 in taxes (or less, depending on your tax bracket). The distinction between a business write-off/deduction and a personal is also quite fundamental. This is not a semantics thing. The people pointing out the difference are not being snarky. On the contrary, they're genuinely trying to help people understand and avoid mistakes.

Yes, those differences can mean a lot when I'm actually filling out my tax return. But when someone is just asking generally whether she can get a tax benefit for some activity, it's disruptive to bicker over the details of where and how she will claim that tax benefit.

[Anonymous]

Anonymous wrote:9:38 here. Following up.

Also, asking someone "do you understand the difference between a tax credit and a tax deduction" isn't a snarky question. It's a sincere one since many people really do NOT understand the difference. And it's important that you do if you're going to try to make these calculations.

NP. I'm not sure the difference is as important when using something like Turbo Tax which will do all the calculations for you.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Childcare credit is crap it should be unlimited

On the contrary, it should be eliminated entirely.

Thanks, SAHM. Go back to posting on the threads about how only terrible mommies would leave their precious snowflake in care of a total stranger. (And then wonder why 4yo DD just stands there and cries while the other kids happily play soccer.)

Um. I'm a WOHD, but you just go on with your miserable existence. If child care is too expensive for you, get a better-paying job.

So you wife is at home then?

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP, if you used a pre-tax savings account for childcare expenses, you can't use the tax credit being discussed. It's one or the other. If you have the option to use a pre-tax savings account in the future, it would probably save you more money than the tax credit at your income level.

Different poster. Can you help me think through those two options?

Option A: Take advantage of the Childcare Credit. Assuming we earn enough to suffer the max phase-out, we get a tax credit of about $1,200 for 2+ children.

Option B: Use a pre-tax flex spending account for childcare. We can use up to $5,000 total in the flex account, in pre tax dollars. We're in the 35% bracket, so we'd essentially be avoiding $1,750 in taxes with the flex account.

Is that generally correct?

yes, i think you basically answered your own question. the question is whether the administrative hassle of getting the FSA reimbursed is it worth the extra $550 to you.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Childcare credit is crap it should be unlimited

On the contrary, it should be eliminated entirely.

Thanks, SAHM. Go back to posting on the threads about how only terrible mommies would leave their precious snowflake in care of a total stranger. (And then wonder why 4yo DD just stands there and cries while the other kids happily play soccer.)

Um. I'm a WOHD, but you just go on with your miserable existence. If child care is too expensive for you, get a better-paying job.

So you wife is at home then?

What wife? I'm a single parent.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP, if you used a pre-tax savings account for childcare expenses, you can't use the tax credit being discussed. It's one or the other. If you have the option to use a pre-tax savings account in the future, it would probably save you more money than the tax credit at your income level.

Different poster. Can you help me think through those two options?

Option A: Take advantage of the Childcare Credit. Assuming we earn enough to suffer the max phase-out, we get a tax credit of about $1,200 for 2+ children.

Option B: Use a pre-tax flex spending account for childcare. We can use up to $5,000 total in the flex account, in pre tax dollars. We're in the 35% bracket, so we'd essentially be avoiding $1,750 in taxes with the flex account.

Is that generally correct?

yes, i think you basically answered your own question. the question is whether the administrative hassle of getting the FSA reimbursed is it worth the extra $550 to you.

OK, thanks. Makes sense to me now.

[Anonymous]

Anonymous wrote:OP, if you used a pre-tax savings account for childcare expenses, you can't use the tax credit being discussed. It's one or the other. If you have the option to use a pre-tax savings account in the future, it would probably save you more money than the tax credit at your income level.

This is not 100% correct. You cannot claim the same expenses for both, but since most people in this area end up paying more than $5k for child care, it often works out that you can fully fund your FSA and also get some of the credit as well. We have two in child care, fully fund our FAS and we still get a decent credit. And we are pretty high-earning so we are phased to the lesser amount of the credit. I'd have to go back through the Turbo Tax section on it, but I think it really helps that we have 2 kids.

[Anonymous]

Your use of "just" implied you incorrectly thought that deduction > credit.

Sorry, I was tired when I wrote that and I'm sorry if my wording was imprecise. I just meant that it was different. I also didn't meant to be overly nitpicky, just that it makes a difference when you are doing your taxes. You are right that a dollar per dollar decrease in your tax liability is "better" than a deduction which lowers your AGI. To address another PP, I also don't see why trying to understand the general gist of what you are inputing into turbo tax (not at the level of a CPA or a tax attorney, but just in laymen's terms) is such a terrible thing. I am no tax expert, but I generally try to google/read sections of the IRS website and get the gist of what my tax credits and deductions are for to ensure that I am inputing everything into Turbo Tax correctly, and I don't like just trusting programs 100% blind.