NE1 know how much$ you save using Flex Spending for daycare?

REOM

Any experts on? 

We currently elect the max, through my H's work. We are now covered under my health plan, which is free, so we are trying to drop my H's plan, which costs approx $100/month for the family. They are telling us if we waive the health, we may have to waive the flex spending too.

Any idea how much you save per year using Flex Spending? Is there a way to calculate it?

Thanks!

kittycarr

I have only heard of this program but only know of one person who has ever told me their experience.  They moved but used to be next-door neighbors.  They used the same daycare E&B go to now and if the price was the same as what I pay now, he saved $100/week.  I know he only paid $35 a week with the daycare flex thing with his work.

REOM

kittycarr:

I have only heard of this program but only know of one person who has ever told me their experience.  They moved but used to be next-door neighbors.  They used the same daycare E&B go to now and if the price was the same as what I pay now, he saved $100/week.  I know he only paid $35 a week with the daycare flex thing with his work.

It's great program, and it definitely saves you money. We have been using it since G started daycare two years ago. But now if we are essentially contributing $100/month just to use it (since we don't need the health care through H's work), we are trying to figure out if it is worth it. Does that make sense even?

ccm1203

as in savings on your taxes?  I would run the number in a paycheck calculator. 

JCS2007

Try this calcuator.  Basically, if I understand what you are asking, you are taking $X out of your paycheck to put into a dependent care sFSA, and since they take it out pre-tax, your taxable income goes down and you pay less in taxes while still getting full access to the $X you put aside per paycheck. The average for the year is to save around $2000 in taxes you dont pay (so get to keep) when you put the max of $5000 in your dependent care FSA.  Does that make sense?

https://www.fsafeds.com/fsafeds/fsa_calculator.asp

 

debbiej

The way you save money is that the money is taken out of your paycheck BEFORE taxes are taken out.  So then the amount of money in your paycheck that you actually have taxes taken out of is smaller.

 Example: Paycheck is $1,000, taxes is 15%.  Taxes taken out is $150, so take home pay is $850.

Say you're using the Flex spending for $100.  They take that out before taxes, so the amount taxed is $900 x 15% = $765.  Add back in the $100 for daycare and you have $865.

You saved yourself $15 in taxes by having that daycare money taken out before taxes.  If you pay for daycare with your paycheck after taxes than you don't get to save that $15 in taxes.

If you get paid 2x a month than that is a $360 savings.  Definitly worth it IMO!

dpdw

Your savings is dependent on your tax bracket & the amount you elect.  Because the money is taken out of your check pre-tax, you don't pay taxes on it.  So, if you are in the 25% tax bracket, you are essentailly getting a 25% discount on the first $5,000 of your daycare expenses (assuming you take the $5,000 FSA max) = something less than $1,250 savings.  It's tought to pinpoint the exact savings, because our tax system is progressive, meaning not all of your income is taxed at 25%, just the amount over a certain level.

Also, if you are close to the threshold of the next tax bracket, it could lessen your tax burden even more because it is not figured into your taxable income, thus keeping you in the lower tax bracket.

ETA -- it doesn't matter which of you has the health insurance, the Dependent Care Flexible Spending Account is completely separate.  Personally I would choose the employer with the best FSA managing company.  Some FSA managing companies reimburse faster/easier than others.

REOM

Awesome, that is exactly the info I was looking for. I googled for that calcualtor and couldn't find it...

I love how I do all my research on the nest

THANK YOU!