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  1. #21
    Join Date
    Dec 2005
    Location
    California
    Posts
    63

    Default

    I know everyone is in a different tax situation and sometime it's hard to give advice...but I thought in general childcare FSA was better.

    This came out on Yahoo. (http://finance.yahoo.com/taxes/artic...Tax_Deductions)

    Has it changed on what is better now????

    ---------

    8. Child-care credit. A credit is so much better than a deduction: It reduces your tax bill dollar for dollar. So missing one is even more painful than missing a deduction that simply reduces the amount of income that's subject to tax.

    But it's easy to overlook the child-care credit if you pay your child-care bills through a reimbursement account at work. Until a few years ago, the child-care credit applied to no more than $4,800 of qualifying expenses. And, the law allows you to run up to $5,000 of such expenses through a tax-favored reimbursement account at work.

    Now, however, up to $6,000 can qualify for the credit...but the old $5,000 limit still applies to reimbursement accounts. So, if you run the maximum $5,000 through a plan at work, but spend more for work-related child care, you can claim the credit on up to an extra $1,000. That would cut your tax bill by at least $200.

  2. #22
    Join Date
    Jun 2005
    Location
    Northern Virginia
    Posts
    2,247

    Default

    bump - because this is a great program and (I think) you can enroll mid-year when your baby is born.
    Don't make me get out the flying monkeys!

  3. #23
    Join Date
    Jul 2005
    Location
    Kansas
    Posts
    315

    Default

    I know everyone is in a different tax situation and sometime it's hard to give advice...but I thought in general childcare FSA was better.

    This came out on Yahoo. (http://finance.yahoo.com/taxes/artic...Tax_Deductions)

    Has it changed on what is better now????

    ---------

    8. Child-care credit. A credit is so much better than a deduction: It reduces your tax bill dollar for dollar. So missing one is even more painful than missing a deduction that simply reduces the amount of income that's subject to tax.

    But it's easy to overlook the child-care credit if you pay your child-care bills through a reimbursement account at work. Until a few years ago, the child-care credit applied to no more than $4,800 of qualifying expenses. And, the law allows you to run up to $5,000 of such expenses through a tax-favored reimbursement account at work.

    Now, however, up to $6,000 can qualify for the credit...but the old $5,000 limit still applies to reimbursement accounts. So, if you run the maximum $5,000 through a plan at work, but spend more for work-related child care, you can claim the credit on up to an extra $1,000. That would cut your tax bill by at least $200.
    I'd love to know the answer to this one too. I posted a similar question in the tax thread under money, but never got an answer.

  4. #24
    Join Date
    Dec 2005
    Location
    California
    Posts
    63

    Default

    I haven't "found" an answer yet. Was going to ask the tax person we used this year...but didn't get the chance since I had already signed up for this year and it didn't matter anymore.

    But, it would be good to know for next year... I've been sending in the reimbursements (online) and the system works ok, but it's just a little bit of a pain to remember to file a claim, scan the paperwork, email the info, wait for the check, and then get my butt to the bank to deposit the check. So, if the tax credit is better, that'll free up a little time.

  5. #25
    Join Date
    Jun 2005
    Location
    CA
    Posts
    4,245

    Default

    I think it's relatively simple to determine whether the FSA or the child care credit is better for your situation by going through the IRS guidelines and looking at your income.

    For one child (my situation), we would save $600 by using the credit. That is $3000 * 20% for AGI over $43k. Using the FSA, we deduct $5000 from our income and since we pay about 30% in taxes (something like that), that would save us $1500. Hence, FSA is better for us.

    With two kids, you can claim $6k for the credit. 20% of that is $1200. For us, it would still be better to do the $5k FSA and then get your additional $200 from the 20% of that extra $1000 in the credit.

    Hope that helps!

    Here are my refrences:
    Claiming the Child and Dependent Care Credit

    Publication 503 Child and Dependent Care Expenses

  6. #26
    Join Date
    Feb 2007
    Location
    Upstate, NY
    Posts
    16,413

    Default

    I haven't read through this but will try tonight. Does anyone know if the amount you contribute to your Flex SPending account can be changed in the middle of the year? I dropped the ball on Flex Spending for childcare last year -I should have done it, anyway, I was fully intending to do it, but my daycare situation may change so I'm a bit hesitant since I'm not sure if I'll be able to change to a licensed provider or not.

  7. #27
    Join Date
    Jul 2005
    Posts
    12,188

    Default

    Not usually. If you have a qualifying event, then you can change elections. I don't believe changing providers qualifies as one of those events, but I've never used the daycare FSA, so I'd check your plan documents.
    Kidlet 1 - 8/06
    Kidlet 2 - 7/09
    Kidlet 3 - 12/12

  8. #28
    Join Date
    Jun 2005
    Location
    Chicago
    Posts
    5,592

    Default

    Yes to what chimi said, but paying someone unlicensed for daycare may be allowed under your plan. They just have to claim it as income on their side.
    She'd be his wife and make him her husband 5/03Ds1 12/22/09...Ds2 8/31/12

  9. #29
    Join Date
    Feb 2007
    Location
    Upstate, NY
    Posts
    16,413

    Default

    Another question -because the Flex Spend guy doesn't know any of these answers. The way I'm reading is that you can do the Flex Spend account and then the Child Care credit on the tax refunds would just be reduced by that amount. I don't think I dare do the max amount for the Flex spending accountin case our daycare situation changes but am thinking about just doing about $2500 just to at least take advantage of of the FSA(which would equivalent to 17 weeks of my current daycare rate).

    ETA: I did call our tax person and left her a message to call me back to advise me about this -I'm being impatient & kicking myself -If I had been told the flex spend guy couldn't anser my questions I would have researched this last week! Ugh!
    Last edited by mcgwigan; 12-17-2013 at 09:00 AM.

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