Reply to taxes - DCFSA v. dependent care tax credit v. child tax credit

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[quote=Anonymous][quote=Anonymous]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?[/quote]

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.

[/quote]

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