Flexible Spending Accounts for Childcare Question

amber*n*scott

This may be a really stupid and obvious question.

The contribution limit is only $5000.  My daycare expenses are about $14000 each year.  If I enroll in the FSA can I still deduct the difference of $9000 from my tax return?

Thank you!

xbrooklyngrl

I don't think so. But I could be wrong.

joseysbride

I don't think so either.  I'd call a tax service and ask, and they could probably run the numbers for you to figure out which would be of greatest benefit.  How much you can get back by claiming it on your taxes depends on your level of income.

Mominator

I'm pretty sure that you can claim up to $10K per year, so deduct from that the $5k that you put in your FSA you should still be able to declare another $5K, but not the full $9K.

s_angel

you DEFINITELY can! I contribute 5K to my FSA every year but daycare expenses are WAY more than that. I use turbo tax, enter in my fsa contributions and enter in my total daycare expenditures. Turbo tax does the calculations but I know they take into account much more than the 5K contributed to FSA. I'm just to sure of the max amount you can deduct.

dpdw

I've had the same situation for the past 3 years & I've never gotten an official answer I feel 100% comfortable with.  When we had a CPA do our taxes she said we could not claim the expenses over the $5,000 FSA -- in other words you either use the FSA or you claim it on your taxes, not both.  When I've read the tax forms that support the tax credit (Form 2441 Child & Dependent Care Expenses) & the FSA it appears to me that you can claim both, but not for the same funds -- in other words if your childcare cost for the year is $14,000, $5,000 would be under the FSA & $9,000 would be under the childcare expense credit.  BUT, when I've plugged my numbers in the fomula (Form 2441) I end up not being able to take the credit. I'm not sure if it is because of our income level or some other reason.  All that said, when I used Turbo Tax the last 2 years we were able to get a small credit for the childcare expenses over the $5,000 FSA.

LeoChic

You can claim daycare expenses that are over and above the $5000 that you get through FSA.  The rule is as follows:  You can claim up to 35% of their care expenses, up to $3,000 for one person or $6,000 for two or more.  There's a worksheet on Pub. 503 that you can use to determine what amount you can use as your tax credit.