taxes - DCFSA v. dependent care tax credit v. child tax credit
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Anonymous
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Can someone in the know break this down for me (or at least check my math)?
I max-ed out my DCFSA ($5000 pre-tax dollars). I believe there is also a dependent care tax credit ($3,000 for 1, $6,000 for 2), from which I need to subtract my DCFSA $. For 1 kid, this eliminated the credit. With 2 kids, I would have $1,000 depdendent care tax credit available, assuming DC2 was in daycare at some point during the year and my child care expenses were $6,000 or greater (ha!)? Also, am I required to file married jointly and use a standard 1040 form to claim this credit? I think so. I believe there is also a child tax credit, but that it is phased-out at a certain AGI ($55,00 for married filing separately, $110,000 for married filing jointly). Does this sound right? |
Anonymous
| ^^^ OP here. The follow-up question being, given my income (over $100K and filing status -- married separate), is it true that I can only take advantage of the DCFSA? |
Anonymous
You do not get it if you are married filing separate. |
Anonymous
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If you are married filing separately, I think you can only set aside $2500 in the FSA. The child care tax credit (Pub 503) says that generally married couples must file a joint return to take the credit. Any reason why you don't want to file jointly?
The child tax credit phaseout begins at the numbers you give but that doesn't necessarily mean you wouldn't get anything - so might as well fill out the form. |
Anonymous
Everything you need to know is here:http://www.irs.gov/publications/p503/ There are income limits for the dependent care credit too. You sound like this example applies: Example 2. Randall is married and both he and his wife are employed. Each has earned income in excess of $6,000. They have two children, Anne and Andy, ages 2 and 4, who attend a daycare facility licensed and regulated by the state. Randall's work-related expenses are $6,000 for the year. Randall's employer has a dependent care assistance program as part of its cafeteria plan, which allows employees to make pre-tax contributions to a dependent care flexible spending arrangement. Randall has elected to take the maximum $5,000 exclusion from his salary to cover dependent care expenses through this program. Although the dollar limit for his work-related expenses is $6,000 (two or more qualifying persons), Randall figures his credit on only $1,000 of the $6,000 work-related expense paid. This is because his dollar limit is reduced as shown next. Randall's Reduced Dollar Limit 1) Maximum allowable expenses for two qualifying persons $6,000 2) Minus: Dependent care benefits selected from employer's cafeteria plan and excluded from Randall's income ?5,000 3) Reduced dollar limit on work-related expenses Randall can use for the credit $1,000 Amount of Credit To determine the amount of your credit, multiply your work-related expenses (after applying the earned income and dollar limits) by a percentage. This percentage depends on your adjusted gross income shown on Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37. The following table shows the percentage to use based on adjusted gross income. IF your adjusted gross income is: THEN the Over: But not over: percentage is: $0 — $15,000 35% 15,000 — 17,000 34% 17,000 — 19,000 33% 19,000 — 21,000 32% 21,000 — 23,000 31% 23,000 — 25,000 30% 25,000 — 27,000 29% 27,000 — 29,000 28% 29,000 — 31,000 27% 31,000 — 33,000 26% 33,000 — 35,000 25% 35,000 — 37,000 24% 37,000 — 39,000 23% 39,000 — 41,000 22% 41,000 — 43,000 21% 43,000 — No limit 20% Yes, the child credit itself phases out at the incomes you list. |