XP: Questions about Taxes and Childcare/ Dependents

Re: XP: Questions about Taxes and Childcare/ Dependents

• jlaOK member

  June 2013

  My only experience comes from doing it myself. You can deduct $3000 for 1 child $6000 for 2+ off your taxes for child care (some income limitations are involved).

   You can also use a dependent care flexible spending account for up to $5000. Most people use the dependent care flexible spending account because it's a higher amount. The only down side is that it is a flexible spending account meaning you have to deal with the documentation/reimbursement process. Also you can only be reimbursed for the amount in the account, and the monthly amount you put in most likely won't cover the amount you pay in daycare each month.

  For each case you have to provide proper documentation including a tax ID number or SSN of your daycare. Basically, you can't deduct daycare expenses for someone who is paid "under the table."

  We have done both and haven't had any trouble with either. The dependent care flexible spending you "feel" more because your paycheck is X dollars less per month because of what goes into the account, but it is overall the better deal.

  

                                                

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• shannm member

  June 2013

  PP gave you good info. I will add that your income level and specific place if work can affect these amounts. My DH's employer limits the pretax amount for people they consider a "highly compensated employee." And some employers don't even offer it.

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• Zcolesky10 member

  June 2013

  So the $3000 for the childcare tax credit is not actually given to you in full right?  It's actually the highest amount that you can claim and that you get a portion (i.e. 20%) of that back in the actual credit?  Am I understanding that right?  Also is there a deduction for dependents as well??
  

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• rockychryslerb2010 member

  June 2013

  Zcolesky10:

  So the $3000 for the childcare tax credit is not actually given to you in full right?  It's actually the highest amount that you can claim and that you get a portion (i.e. 20%) of that back in the actual credit?  Am I understanding that right? 
  

  yes

   and most cases you can deduct dependents, but if you qualify for AMT, you no longer qualify for that deduction.
  

   

   

  
  

  laying down the law on Oahu's North Shore
  

  
  

  

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• boogerbearoriginal member

  June 2013

  hocus:

  Zcolesky10:

  So the $3000 for the childcare tax credit is not actually given to you in full right?  It's actually the highest amount that you can claim and that you get a portion (i.e. 20%) of that back in the actual credit?  Am I understanding that right?  Also is there a deduction for dependents as well??
  

   

  Yes you don't always get $3000 you get UP TO $3000 depending on what you pay and the percent guidelines for your income. The number of folks in your household is a separate tax issue. 

  That's not phrased correctly - for one child, you can claim up to $3000 of expenses and get a percentage (35%-20% depending on income) as a credit. So the max credit is actually $1,050-$600.  The max eligible expenses rises to $6k with a second+ child, so $2,100 down to $1,200 credit.  At which point you can also utilize both FSA (at max $5k tax-free), and credit for the other $1k of expenses for a credit of $350-$200. But you will never get $3k as a credit for childcare.  Any expenses beyond the max is too bad so sad. 
  

  And there is a deduction simply for having a child as well, IIRC it's $1k/dependent. 
  

  
  
  

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