Another question about dependent care FSA

Re: Another question about dependent care FSA

• jlaOK member

  November 2013

  You are correct.  The money is taken out of your check pre-taxed, you pay daycare, then get reimbursed.  It probably depends on your company but our reimbursements usually take about a week to come in.  For budgeting purposes, we budget based on our salary after the money is taken out and treat reimbursements as "extra" money.

  

                                                

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• mamaz27 member

  November 2013

  We treat the reimbursements as extra money too.  In fact, we use the $5,000 in reimbursements to fund my husband's Roth IRA.

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• WBMom member

  November 2013

  I don't know if I will answer this fully.

  The max you can contribute to an Dependent care FSA is $5000 per calendar year.  That money is taken out pretax so it reduces your taxable income.  For me I am paid on the 15/30 of the month.  The $5000 is spread out equally over those 24 paychecks and basically $208.33 is taken out per paycheck.

  For our dependent care you cannot submit a reimbursement until you have money accumulated so once I have a certain amount I submit a claim.  I can get reimbursed within 5 business days typically.  I do pay the daycare and then do a reimbursement later. If your annual dependent cares expenses are less than your annual election amount, you forfeit any unused balance.  

  

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• ss+el member

  November 2013

  Thanks! We can't afford to have that money missing for a portion of each month, so I'll have to think about whether I want to bother. Fortunately, DS starts K next fall, so daycare expenses will drop again. Of course, that's when tuition starts...
  

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• ASmallWonder member

  November 2013

  Sorry to hijack this thread but I have another question  I don't understand the financial benefit difference between using the FSA and claiming the paid money on your taxes at year end.  Am I correct that it's one or the other?  "Paying twice" for part of the money until it's reimbursed would be a little bit of a challenge but doable but I'm not sure it's worth the effort if I can claim it at year end and have it end up benefitting me about the same amount.

  Formerly known as elmoali

  
  

  
  

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• JJ_13 member

  November 2013

  elmoali said:

  Sorry to hijack this thread but I have another question  I don't understand the financial benefit difference between using the FSA and claiming the paid money on your taxes at year end.  Am I correct that it's one or the other?  "Paying twice" for part of the money until it's reimbursed would be a little bit of a challenge but doable but I'm not sure it's worth the effort if I can claim it at year end and have it end up benefitting me about the same amount.

  The limits are different. As I understand it, it's $3000 if you pay it yourself and don't use a DCA and $5000 if you use a DCA (and therefore set money aside pre tax). So, you end up with a higher tax break if you use a DCA, but only marginally so. It's worth it if you can afford it, but not if you can't. Like PPs, we use the reimbursements as "extra" money.
  

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• ASmallWonder member

  November 2013

  JJ_13 said:

  elmoali said:

  Sorry to hijack this thread but I have another question  I don't understand the financial benefit difference between using the FSA and claiming the paid money on your taxes at year end.  Am I correct that it's one or the other?  "Paying twice" for part of the money until it's reimbursed would be a little bit of a challenge but doable but I'm not sure it's worth the effort if I can claim it at year end and have it end up benefitting me about the same amount.

  The limits are different. As I understand it, it's $3000 if you pay it yourself and don't use a DCA and $5000 if you use a DCA (and therefore set money aside pre tax). So, you end up with a higher tax break if you use a DCA, but only marginally so. It's worth it if you can afford it, but not if you can't. Like PPs, we use the reimbursements as "extra" money.
  

  What if you have two kids?  Does the FSA limit go up?  I believe the tax break is $6000 for two kids.

  Formerly known as elmoali

  
  

  
  

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• jlaOK member

  November 2013

  elmoali said:

  JJ_13 said:

  elmoali said:

  Sorry to hijack this thread but I have another question  I don't understand the financial benefit difference between using the FSA and claiming the paid money on your taxes at year end.  Am I correct that it's one or the other?  "Paying twice" for part of the money until it's reimbursed would be a little bit of a challenge but doable but I'm not sure it's worth the effort if I can claim it at year end and have it end up benefitting me about the same amount.

  The limits are different. As I understand it, it's $3000 if you pay it yourself and don't use a DCA and $5000 if you use a DCA (and therefore set money aside pre tax). So, you end up with a higher tax break if you use a DCA, but only marginally so. It's worth it if you can afford it, but not if you can't. Like PPs, we use the reimbursements as "extra" money.
  

  What if you have two kids?  Does the FSA limit go up?  I believe the tax break is $6000 for two kids.

  It is $6000 for two kids, but the percentage is reduced depending on your income.  If you make more than $43000 than you only get 20 percent, so if you are in a higher tax bracket than 20% the $5000 DCFSA is saving you more.  You can, however, claim the additional $1000 on your taxes therefore taking advantage of the full $6000.
  
  

  

                                                

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