Dependent Care Spending Accounts

[Anonymous]

Need some input - I've heard from several folks that it would be in my best interest to sign up. I'm aware that the max contribution is 5k. However, I'm paying around 15k for daycare. Can I claim the remaining 10k on my taxes?? Or is this not a good idea.

I apologize - not knowledgeable about this nor are most folks in my circle. Thanks in advance

[Anonymous]

You can't claim the remaining 10K on your taxes, but you will get a small childcare tax credit. I can't remember what is it, maybe $500 or $1000 or something. In any event you should contribute to a daycare flex spending account. That way you can at least pay some of your daycare expenses with pre-tax dollars.

[Anonymous]

Thanks so much

[Anonymous]

Anonymous wrote:You can't claim the remaining 10K on your taxes, but you will get a small childcare tax credit. I can't remember what is it, maybe $500 or $1000 or something. In any event you should contribute to a daycare flex spending account. That way you can at least pay some of your daycare expenses with pre-tax dollars.

How does she get the childcare credit if she exhaust the entire 5k in dependent care?

[Anonymous]

Anonymous wrote:Need some input - I've heard from several folks that it would be in my best interest to sign up. I'm aware that the max contribution is 5k. However, I'm paying around 15k for daycare. Can I claim the remaining 10k on my taxes?? Or is this not a good idea.

I apologize - not knowledgeable about this nor are most folks in my circle. Thanks in advance

No, only 5.

[Anonymous]

If you have 1 child, you will not be able to claim anything additional on your taxes. The limit for the childcare tax credit for 1 child is $3000--so your $5000 for the dependent care account exceeds that.

If you have 2 children, the cap on the childcare tax credit is $6000. The dependent care limit is still $5000--so you can apply an additional $1000--which is then adjusted based on your income.

If you have more than 2 kids--the cap for the childcare tax credit is still $6000, so you get no additional benefit.

At higher salaries, the childcare tax credit is only 20% of the amount you are claiming and the FSA is a much better option.

This article is old, but a reasonable explanation:
http://www.kiplinger.com/article/business/T020-C001-S001-flexible-spending-account-vs-dependent-care-credit.html

[Anonymous]

We have a 200k HHI and found the 5k in the dependent care FSA saves more money than taking the 6k tax credit. It's a bit more work, but you know you'll end up spending 5k and getting your money back.

[Anonymous]

Depending on your income, you might still be eligible for some portion of the child care tax credit, so it's worth doing the calculations. I don't think I qualify anymore.

I do the $5K for the FSA; my daycare bill was about what yours was. It makes a nice dent, at least.

Once your child is out of daycare/preschool and in extended day and summer camps, you can use the FSA for both of those things.