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CaseyGirl
Mommy to 3 Boys :)
Member since 5/05 19978 total posts
Name:
Jen - counting my blessings...
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tax question regarding daycare
For those of you who pay for child care, do you put money into a flex spending account at work or do you take a dependent tax credit?
What works better for you and why?
I was planning to do the flex spending but now things are up in the air with my DH's employment. So to have the $ taken out of my check for flex spending right now is scary. This is to begin in January. Right now we don't know what our situation will be.
Any advice?
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Posted 11/5/09 9:24 AM  |
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Long Island Weddings
Long Island's Largest Bridal Resource |
dpli
Daylight savings :)
Member since 5/05 13973 total posts
Name:
D
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Re: tax question regarding daycare
We did the tax credit because our accountant told us that would work better for us. It probably varies for each family.
We also didn't do the flex spending because at the time we would have had to enroll, we were new to daycare and I didn't know how it would work out.
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| Posted 11/5/09 9:41 AM |
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LeShellem
A new beginning
Member since 2/07 3600 total posts
Name:
LeShelle
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Re: tax question regarding daycare
We are doing both. The FSA only covers $5000, our tuition for half of the year will be close to $9000. So we will still have $4000 to claim on our taxes. Next year DS will be there the whole year and we will do the same, only we will have a lot more we can claim.
Message edited 11/5/2009 12:55:39 PM.
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| Posted 11/5/09 11:31 AM |
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nrthshgrl
It goes fast. Pay attention.
Member since 7/05 57538 total posts
Name:
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Re: tax question regarding daycare
We used the tax credit.
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| Posted 11/5/09 11:33 AM |
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dani731
Blessed!!!
Member since 1/08 3355 total posts
Name:
D
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Re: tax question regarding daycare
Posted by LeShellem
We are doing both. The tax credit only covers $5000, our tuition for half of the year will be close to $9000. So we will still have $4000 to claim on our taxes. Next year DS will be there the whole year and we will do the same, only we will have a lot more we can claim.
Same here FSA is $5000 max/year and our daycare expenses will be about $9000 or $10000 for the year so we are doing the FSA and then we are going to claim the rest on out taxes.
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| Posted 11/5/09 11:43 AM |
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MrsS2005
Mom of 3
Member since 11/05 13118 total posts
Name:
B
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Re: tax question regarding daycare
Can't you do both? The $5,000 FSA doesn't even come close to DS's daycare costs.
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| Posted 11/5/09 11:44 AM |
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MST9106
My life:)
Member since 6/06 9589 total posts
Name:
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Re: tax question regarding daycare
Posted by LeShellem
We are doing both. The tax credit only covers $5000, our tuition for half of the year will be close to $9000. So we will still have $4000 to claim on our taxes. Next year DS will be there the whole year and we will do the same, only we will have a lot more we can claim.
I thought the tax credit was only $3K? Thats why some people were debating to do the FSA which max is $5K
Here is the source IRS Childcare Credit
Message edited 11/5/2009 11:55:26 AM.
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| Posted 11/5/09 11:50 AM |
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mtnmama
Member since 5/06 4794 total posts
Name:
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Re: tax question regarding daycare
Link to Babycenter article here
It sounds like if you are in a higher income tax bracket you benefit more from the flex-spending option. This article says you can do both, but does not give the criteria. Guess I need to call my CPA and make sure I do the right thing.
Message edited 11/5/2009 12:31:15 PM.
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| Posted 11/5/09 12:29 PM |
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LeShellem
A new beginning
Member since 2/07 3600 total posts
Name:
LeShelle
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Re: tax question regarding daycare
Posted by MST9106
Posted by LeShellem
We are doing both. The tax credit only covers $5000, our tuition for half of the year will be close to $9000. So we will still have $4000 to claim on our taxes. Next year DS will be there the whole year and we will do the same, only we will have a lot more we can claim.
I thought the tax credit was only $3K? Thats why some people were debating to do the FSA which max is $5K
Here is the source IRS Childcare Credit
Sorry, I met to sax that FSA only covers $5000. So I can still claim $3000 for the tax credit.
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| Posted 11/5/09 12:55 PM |
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dpli
Daylight savings :)
Member since 5/05 13973 total posts
Name:
D
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Re: tax question regarding daycare
I could be wrong, but I was under the impression that you couldn't do both.
ETA: I think WE were told we couldn't do both. I read that Babycenter article - I guess our circumstances don't allow both. The article says you can't use the same expenses for both. So maybe you can do both if you have other expenses related to dependent care besides straight daycare bills?
Message edited 11/5/2009 1:05:39 PM.
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| Posted 11/5/09 12:56 PM |
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Xelindrya
Mommy's little YouTube Star!
Member since 8/05 14470 total posts
Name:
Veronica
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Re: tax question regarding daycare
Both?
Wow never thought of that!!!!
What will I need to prove the remaining amount?
I took $5K on Dependent spending
Total Daycare amounts:
6000 - NY
4000 - TX
= total of $10,000
Do I need to prove these values to get the $3k credit? If so what should I be looking for now?
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| Posted 11/5/09 1:02 PM |
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MST9106
My life:)
Member since 6/06 9589 total posts
Name:
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Re: tax question regarding daycare
Posted by LeShellem
Posted by MST9106
Posted by LeShellem
We are doing both. The tax credit only covers $5000, our tuition for half of the year will be close to $9000. So we will still have $4000 to claim on our taxes. Next year DS will be there the whole year and we will do the same, only we will have a lot more we can claim.
I thought the tax credit was only $3K? Thats why some people were debating to do the FSA which max is $5K
Here is the source IRS Childcare Credit
Sorry, I met to sax that FSA only covers $5000. So I can still claim $3000 for the tax credit.
I don't think you can...that's why a lot of moms are posting about which one is a wiser way to go with...the tax credit or the FSA...
Correct me if I'm wrong.
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| Posted 11/5/09 1:06 PM |
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LeShellem
A new beginning
Member since 2/07 3600 total posts
Name:
LeShelle
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Re: tax question regarding daycare
Posted by dpli
I could be wrong, but I was under the impression that you couldn't do both.
ETA: I think WE were told we couldn't do both. I read that Babycenter article - I guess our circumstances don't allow both. The article says you can't use the same expenses for both. So maybe you can do both if you have other expenses related to dependent care besides straight daycare bills?
See I thought you couldn't claim both for the same amount of money. So if you spent 5k on childcare and did the fsa, you couldn't also claim the child tax credit but if you pay 10k and 5k is Fsa you should be able to claim the additional 5k for the child tax credit. This is what I was told, but now i am trying to find out if this is correct.
Message edited 11/5/2009 1:21:34 PM.
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| Posted 11/5/09 1:14 PM |
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dpli
Daylight savings :)
Member since 5/05 13973 total posts
Name:
D
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Re: tax question regarding daycare
Posted by LeShellem
Posted by dpli
I could be wrong, but I was under the impression that you couldn't do both.
ETA: I think WE were told we couldn't do both. I read that Babycenter article - I guess our circumstances don't allow both. The article says you can't use the same expenses for both. So maybe you can do both if you have other expenses related to dependent care besides straight daycare bills?
See I thought you couln't claim both for the same amount of money. So if you spent 5k on childcare and did the fsa, you couldn't also claim the child tax credit but if you pay 10k and 5k is Fsa you should be able to claim the additional 5k for the child tax credit. This is what I was told, but now i am trying to find out if this is correct.
That makes sense. My DH no longer has the job that had the FSA, so I don't think we bothered checking after that.
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| Posted 11/5/09 1:16 PM |
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MrsS2005
Mom of 3
Member since 11/05 13118 total posts
Name:
B
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Re: tax question regarding daycare
Posted by dpli
I could be wrong, but I was under the impression that you couldn't do both.
ETA: I think WE were told we couldn't do both. I read that Babycenter article - I guess our circumstances don't allow both. The article says you can't use the same expenses for both. So maybe you can do both if you have other expenses related to dependent care besides straight daycare bills?
I thought it was possible to do both, but it seems to only be allowed for people who have at least 2 kids. I'm not positive, but I think you can claim one child's expenses for FSA and the other child's expenses for the credit.
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| Posted 11/5/09 1:17 PM |
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dpli
Daylight savings :)
Member since 5/05 13973 total posts
Name:
D
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Re: tax question regarding daycare
Posted by MrsS2005
Posted by dpli
I could be wrong, but I was under the impression that you couldn't do both.
ETA: I think WE were told we couldn't do both. I read that Babycenter article - I guess our circumstances don't allow both. The article says you can't use the same expenses for both. So maybe you can do both if you have other expenses related to dependent care besides straight daycare bills?
I thought it was possible to do both, but it seems to only be allowed for people who have at least 2 kids. I'm not positive, but I think you can claim one child's expenses for FSA and the other child's expenses for the credit.
This is why we use an accountant 
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| Posted 11/5/09 1:17 PM |
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LeShellem
A new beginning
Member since 2/07 3600 total posts
Name:
LeShelle
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Re: tax question regarding daycare
Ok this is off the IRS website.
9. The qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that you exclude from your income.
I take this to mean that if i pay 9k for childcare I can't claim 9k for the tax credit because I first need to deduct dependent care benefits (FSA) of 5K. I can not claim 4k for the tax credit.
Any accountants out there? Is this correct. IRS
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| Posted 11/5/09 1:20 PM |
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MST9106
My life:)
Member since 6/06 9589 total posts
Name:
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Re: tax question regarding daycare
Posted by LeShellem
Posted by dpli
I could be wrong, but I was under the impression that you couldn't do both.
ETA: I think WE were told we couldn't do both. I read that Babycenter article - I guess our circumstances don't allow both. The article says you can't use the same expenses for both. So maybe you can do both if you have other expenses related to dependent care besides straight daycare bills?
See I thought you couln't claim both for the same amount of money. So if you spent 5k on childcare and did the fsa, you couldn't also claim the child tax credit but if you pay 10k and 5k is Fsa you should be able to claim the additional 5k for the child tax credit. This is what I was told, but now i am trying to find out if this is correct.
I get what you're saying...but I don't think that it can be done that way. If its possible, then that would be friggin FANTASTIC as my son's daycare is costing me an arm and a leg.
Message edited 11/5/2009 1:21:29 PM.
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| Posted 11/5/09 1:21 PM |
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MrsS2005
Mom of 3
Member since 11/05 13118 total posts
Name:
B
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Re: tax question regarding daycare
Posted by dpli
Posted by MrsS2005
Posted by dpli
I could be wrong, but I was under the impression that you couldn't do both.
ETA: I think WE were told we couldn't do both. I read that Babycenter article - I guess our circumstances don't allow both. The article says you can't use the same expenses for both. So maybe you can do both if you have other expenses related to dependent care besides straight daycare bills?
I thought it was possible to do both, but it seems to only be allowed for people who have at least 2 kids. I'm not positive, but I think you can claim one child's expenses for FSA and the other child's expenses for the credit.
This is why we use an accountant
My dad is a (my) CPA/tax attorney. I just asked him about this and he said we couldn't use both with one child.
Message edited 11/5/2009 1:41:41 PM.
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| Posted 11/5/09 1:24 PM |
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annoyedTTCer
LIF Adult
Member since 4/09 3272 total posts
Name:
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Re: tax question regarding daycare
"Generally, the more you earn, the more you'll benefit from an FSA, particularly if you're at or above the 25 percent federal tax bracket. Taxpayers in the 15 percent federal tax bracket who have only one child and have qualified expenses of at least $3,000 may be best off with the FSA, too.
For example, a married couple filing a joint federal tax return with a taxable income of $80,000 will save federal taxes of $1,250 (25 percent of $5,000) if one parent contributes $5,000 to a dependent-care FSA account. In addition, social security taxes will be reduced by $310 and Medicare taxes by $72.50."
We are in 33% tax bracket so our accountant told us to do dependant care and flex spending accounts to save on taxes
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| Posted 11/5/09 1:26 PM |
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dani731
Blessed!!!
Member since 1/08 3355 total posts
Name:
D
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Re: tax question regarding daycare
Posted by LeShellem
Ok this is off the IRS website.
9. The qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that you exclude from your income.
I take this to mean that if i pay 9k for childcare I can't claim 9k for the tax credit because I first need to deduct dependent care benefits (FSA) of 5K. I can not claim 4k for the tax credit.
Any accountants out there? Is this correct. IRS
This is correct. FYI- I am accountant but I am NOT a CPA.
If your expenses are $9k and you do the FSA for $5k, then you can only claim the addition $4k for the tax credit.
This is exactly what I am doing. My daycare expenses for 2010 will be aboput $9400. So I am doing $5k with the FSA and I will claim the $4400 on my taxes for the credit.
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| Posted 11/5/09 1:26 PM |
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MrsS2005
Mom of 3
Member since 11/05 13118 total posts
Name:
B
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Re: tax question regarding daycare
Posted by dani731
Posted by LeShellem
Ok this is off the IRS website.
9. The qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that you exclude from your income.
I take this to mean that if i pay 9k for childcare I can't claim 9k for the tax credit because I first need to deduct dependent care benefits (FSA) of 5K. I can not claim 4k for the tax credit.
Any accountants out there? Is this correct. IRS
This is correct. FYI- I am accountant but I am NOT a CPA.
If your expenses are $9k and you do the FSA for $5k, then you can only claim the addition $4k for the tax credit.
This is exactly what I am doing. My daycare expenses for 2010 will be aboput $9400. So I am doing $5k with the FSA and I will claim the $4400 on my taxes for the credit.
Are you sure you can do that if you only have 1 child? From what I've read, you can only get the benefits of both if you have more than 1 child.
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| Posted 11/5/09 1:51 PM |
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dani731
Blessed!!!
Member since 1/08 3355 total posts
Name:
D
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Re: tax question regarding daycare
Posted by MrsS2005
Posted by dani731
Posted by LeShellem
Ok this is off the IRS website.
9. The qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that you exclude from your income.
I take this to mean that if i pay 9k for childcare I can't claim 9k for the tax credit because I first need to deduct dependent care benefits (FSA) of 5K. I can not claim 4k for the tax credit.
Any accountants out there? Is this correct. IRS
This is correct. FYI- I am accountant but I am NOT a CPA.
If your expenses are $9k and you do the FSA for $5k, then you can only claim the addition $4k for the tax credit.
This is exactly what I am doing. My daycare expenses for 2010 will be aboput $9400. So I am doing $5k with the FSA and I will claim the $4400 on my taxes for the credit.
Are you sure you can do that if you only have 1 child? From what I've read, you can only get the benefits of both if you have more than 1 child.
See below #7 under Test to Claim Credit AND #3 under Dependent Care Benefits
Publication 503 (2008), Child and Dependent Care Expenses
ETA - I am not 100% sure on this but I am going to look into it more. I am going to do a test when I go home on the 2008 tax software that I have. I am going to see how it actually works, rather than try to figure it out from reading all that IRS stuff.....
Message edited 11/5/2009 2:24:07 PM.
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| Posted 11/5/09 2:12 PM |
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MrsS2005
Mom of 3
Member since 11/05 13118 total posts
Name:
B
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Re: tax question regarding daycare
Posted by dani731
Posted by MrsS2005
Posted by dani731
Posted by LeShellem
Ok this is off the IRS website.
9. The qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that you exclude from your income.
I take this to mean that if i pay 9k for childcare I can't claim 9k for the tax credit because I first need to deduct dependent care benefits (FSA) of 5K. I can not claim 4k for the tax credit.
Any accountants out there? Is this correct. IRS
This is correct. FYI- I am accountant but I am NOT a CPA.
If your expenses are $9k and you do the FSA for $5k, then you can only claim the addition $4k for the tax credit.
This is exactly what I am doing. My daycare expenses for 2010 will be aboput $9400. So I am doing $5k with the FSA and I will claim the $4400 on my taxes for the credit.
Are you sure you can do that if you only have 1 child? From what I've read, you can only get the benefits of both if you have more than 1 child.
See below #7 under Test to Claim Credit AND #3 under Dependent Care Benefits
Publication 503 (2008), Child and Dependent Care Expenses
ETA - I am not 100% sure on this but I am going to look into it more. I am going to do a test when I go home on the 2008 tax software that I have. I am going to see how it actually works, rather than try to figure it out from reading all that IRS stuff.....
In the link you posted, the explanation under "Reduced Dollar Limit" seems to show that for one child, any amount you pay towards a flexible spending account would be deducted from your credit. Maybe I'm reading this wrong, but to me, it seems that if you use at least $3,000 for a flexible spending account for one child, you wouldn't be able to get the credit. It would cancel the credit out.
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| Posted 11/5/09 3:49 PM |
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LeShellem
A new beginning
Member since 2/07 3600 total posts
Name:
LeShelle
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Re: tax question regarding daycare
Ok, so I am not giving up on this. Found this on Aetna.
Your Dependent Care FSA and Tax Credits:
You can use both a dependent care FSA and claim the Child and Dependent Care Credit when your file your income taxes, but you cannot claim the same expenses for both. If you plan to use both, the IRS requires that you subtract the amount you have directed into a spending account from the expenses you use to calculate the tax credit.
Complete IRS Form 2441 when filing your income taxes for the year
Your employer will report all dependent care contributions in Section 10 of your W-2 Form(s).
For more information, visit www.irs.gov.
Aetna Link
So it sounds like if you pay more than the 5k for fsa you can claim any additional amount above that.
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| Posted 11/5/09 3:57 PM |
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