Dependent Reimbursement Account or Child tax credit, which should I take?

Question

I plan on using the Dependent Reimbursement Account (DRA going forward) for Day care for my one year old. The max I can put in the account in mu state is $5,000.00 and his tuition is $600.00 a month. Should I set aside the pre tax $5,000.00 or claim the child tax credit at the end of the year? This is tearring me up because I know I have to earn about $825.00 to earn $600.00 after tax.

In addition I am not married but do live with the childs mother. If I do the DRA, can she claim him and get the child tax credit?

I live in North Carolina.

Answer 1

Whoever claims the child as a dependent also gets the benefit of the child tax credit. Just because you are using the DRA doesn't mean you can't claim the child tax credit at the end of the year. She can definetely still claim your son and the child tax credit. Whoever has the higher income usually claims head of household on their return. I would advise you to figure both of your returns with and without the child to see how you can get the most money back for both of you together. Good luck.

Answer 2

You can do the DRA and still claim the child tax credit. Either one of you can claim it - whoever provided most support. But only one of you can file as head of household.

Answer 3

once you utilize your DCRA account you may not comprise those expenditures of your daycare. it truly is already tax unfastened money. the quantity of your ctc and based care can selection counting on your earnings. a large earnings of your DCRA is that it comes without postpone off your earnings and you by no ability could pay taxes on it so it truly is in lots of cases stable to max it while you're relatively going to spend that funds. submitting married separate is the optimal tax bracket and you lose many deductions.