s/o taxes and daycare

everam01 · October 2011

My employer offers the option for a daycare expense account (up to $5K) which will come out of my salary pre-tax. I realize this will reduce the amount that can be written off during tax time.

However, I'm fairly ignorant of how daycare works with taxes anyway. How much can you write off? If you take the expense account, can you still write off the rest?

I'm trying to figure out if it would be in my best interest to sign up for the account or to just write off as much as I can during tax time. We itemize and file jointly.

tosababy · October 2011

You can either:

(1) reduce your taxable income by $5k (thus reducing the amount of income you pay taxes on) by having the money put pre-tax into a dependent care reimbursement account, or

(2) take the child care tax credit (though with two, op, you would be able to do the $5k in the DCRA and then also get the tax credit based on $1k of expenses (for the credit, it's $3k of expenses per kid, up to two kids, so $6k - $5k = $1k you can get the credit on).

You can't double dip, though you can get partial credit for the 2nd child.

Here's a worksheet to figure out what is better for you (it will depend on your tax bracket).

Blackvelvet · October 2011

I'm not 100% sure but I think it all ends up the same but it's way easier to have it taken out from the get go and pay daycare with it

https://blog.taxact.com/?p=4915

"One caveat, if you contribute to a flex spending account for childcare, you will not be able to apply for the credit (since the money used to pay for the childcare was not taxed), I highly recommend doing this if it is available to you. Flex spending accounts allow you to set money aside, tax free, to pay for medical and/or childcare expenses (and generally offer higher tax savings than the Child Care Credit). Contributing to a flex spending account will reduce your taxable income as well and that?s always a good thing to do."

JessieJH · October 2011

I'm just starting to lurk on this board (not due until Feb), but this post got me interested since DH and I were talking over our dependent flex plan just last week.

Can we both take the 5K deduction for our Dependent FSA's or is that double dipping come tax time? It's our first year of filing jointly, so we're so confused!

Momtobug31 · October 2011

I heard that the general rule is if your household income is above $50K or so, you're better off using the flexible spending account. We considered this, but decided that we needed the couple hundred each month, rather than putting is aside and getting reimbursed later.

MBandBud · October 2011

Here is another article which indicates Flex is more the way to go under most circumstances. https://www.kiplinger.com/columns/ask/archive/2009/q0924.htm

MBandBud · October 2011

JessieJH:

I'm just starting to lurk on this board (not due until Feb), but this post got me interested since DH and I were talking over our dependent flex plan just last week.

Can we both take the 5K deduction for our Dependent FSA's or is that double dipping come tax time? It's our first year of filing jointly, so we're so confused!

It is $5000 total if filing jointly, $2500 if filing separate.

shannm · October 2011

As others have stated, most of the time, the pretax account is the way to go. For us, it saved us 600 dollars in a year compared to claiming the deduction at tax time.

mittensonkittens · October 2011

JessieJH:
I'm just starting to lurk on this board (not due until Feb), but this post got me interested since DH and I were talking over our dependent flex plan just last week.

Can we both take the 5K deduction for our Dependent FSA's or is that double dipping come tax time? It's our first year of filing jointly, so we're so confused!

Only one of you can do it.

tosababy · October 2011

$5k total per fam, even if both your employers offer it.

UsedToBeGoldie · October 2011

we pay approx 24K/year total for daycare... we do the 5K in a dependent care account - can we get any credit other than doing that? I have always entered it into my Turbo tax but was never sure if it was helping me or not. (i'd put in the total amount minus the 5K that was pre-tax)

everam01 · October 2011

Thanks for the replies! I actually learned a lot here. I'm going to check out the worksheet as well.

AnnecyDream · October 2011

UsedToBeGoldie:
we pay approx 24K/year total for daycare... we do the 5K in a dependent care account - can we get any credit other than doing that? I have always entered it into my Turbo tax but was never sure if it was helping me or not. (i'd put in the total amount minus the 5K that was pre-tax)

I'd love to know the answer to this too. We pay significantly more than $5K/year and do the FSA, so is there anything else?

tosababy · October 2011

AnnecyDream:
UsedToBeGoldie:
we pay approx 24K/year total for daycare... we do the 5K in a dependent care account - can we get any credit other than doing that? I have always entered it into my Turbo tax but was never sure if it was helping me or not. (i'd put in the total amount minus the 5K that was pre-tax)
I'd love to know the answer to this too. We pay significantly more than $5K/year and do the FSA, so is there anything else?

With only one, there is nothing more you can do.

With two or more, you can take the child care tax credit on $1000 worth of expenses ($6k - the $5k from the FSA).

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