Does anyone here use this benefit? We had a kid last year and pay about $600 a month in day care. Is it worth it to start a dependent care FSA and pay it with pretax money or reduce our tax burden by 5k?

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Posted by southside

SW of Monroe

Member since Aug 2018

647 posts

Posted on 10/26/22 at 3:15 pm to Civildawg

yes, pay that $600 with post tax money and it probably took about $750-800 pre tax dollars.

HSA and FSA are no brainers as long as you have "guaranteed" expenses so that you don't lose the FSA at year end.

Do some reading on the FSA, you can even pay babysitters at home if you're using them so that you can go to work.

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Posted by BlackAdam

Member since Jan 2016

7052 posts

Posted on 10/26/22 at 4:13 pm to Civildawg

quote:
Does anyone here use this benefit? We had a kid last year and pay about $600 a month in day care. Is it worth it to start a dependent care FSA and pay it with pretax money or reduce our tax burden by 5k?

It depends. Do the math and figure if the FSA is better for your situation or the Dependent Care Tax Credit.

Depending on your income a tax credit of 35% on $3000 in eligible expenditures may save you more than reducing your income by $5000.

If you qualify for the credit at a lesser rate than 35% you will just have to check the spread.

This post was edited on 10/26/22 at 4:16 pm

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Posted by Sterling Archer

Member since Aug 2012

8249 posts

Posted on 10/26/22 at 9:10 pm to Civildawg

LINK

Here is a savings calculator you can use.

We use it for our two little ones. I miss when in 2021 they temporarily increased the max contribution to 10K. Pay 2700 a month for two right now but it helps a little

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