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Daycare taxes with a FLEX account?
Posted on 2/9/15 at 12:03 pm
Posted on 2/9/15 at 12:03 pm
Will I still receive the same deductions for daycare costs if I used a Flex account to pay each month?
3
Posted on 2/9/15 at 12:07 pm to StringedInstruments
I think it depends on income, but may be wrong. I used a FSA for the first 5k of the 15k I payed throughout the year, and get no deduction for daycare per TurboTax.
ETA: I believe both parents have to hold a full time job also. Not a tax guy just going by what I understood after inputting all my numbers this weekend.
ETA: I believe both parents have to hold a full time job also. Not a tax guy just going by what I understood after inputting all my numbers this weekend.
This post was edited on 2/9/15 at 12:08 pm
Posted on 2/9/15 at 12:28 pm to StringedInstruments
For Federal taxes only, when calculating the child care credit, you can use up to $3,000 of expenses per child, up to a max of $6,000 total. However, that amount is reduced by whatever you use a dependent care account to pay for.
For example, if I pay $7,000 per kid, 2 kids, that's a total of $14,000. When calculating the credit, I use $3,000 per kid, total $6,000. However, that $6,000 is reduced by the $5,000 I put into the dependent care account. So, my tax credit is based on $1,000.
Just keep in mind that for many people, the deduction from the dependent care account is worth more than the credit. If you are in the 25 percent marginal tax bracket, you are saving 25 cents in tax for each dollar you put away. The credit for someone in that same tax bracket is 20 cents on the dollar.
For example, if I pay $7,000 per kid, 2 kids, that's a total of $14,000. When calculating the credit, I use $3,000 per kid, total $6,000. However, that $6,000 is reduced by the $5,000 I put into the dependent care account. So, my tax credit is based on $1,000.
Just keep in mind that for many people, the deduction from the dependent care account is worth more than the credit. If you are in the 25 percent marginal tax bracket, you are saving 25 cents in tax for each dollar you put away. The credit for someone in that same tax bracket is 20 cents on the dollar.
Posted on 2/9/15 at 12:36 pm to LSUFanHouston
Thanks for the detailed response. Your example explains the situation much better than that mumbo-jumbo listed under the help topics in the software.
Posted on 2/9/15 at 12:42 pm to StringedInstruments
What is is required to claim childcare expenses on the care providers end? If I pay a relative to watch my kid, can I claim that as an expense?
Posted on 2/9/15 at 12:50 pm to Creamer
In this case, to claim the credit, I think they need to report the income on their taxes. I am in the same boat right now. Pay a nanny off the books and get no credit or go to a daycare and claim the daycare credits
Posted on 2/9/15 at 1:24 pm to Creamer
You would need name, address and SS# or FEIN. If relative is not claiming as income they will probably not give you the number. Also, if you happen to find out what their number is, and claim expenses on your return and they have not, could get nasty quick.
Posted on 2/9/15 at 1:57 pm to DawgCountry
Thanks guys, sounds like I am in the same boat. The discount I get compared to sending to daycare is much more valuable than the expense claim.
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