Any advantage to using a Dependent Care FSA (Flexible Spending Account) vs filing your Expenses @ yr end?

Question

I have done the Dependent Care FSA with my employer for 3 years now, but it's a huge pain to claim to get my money reimbursed biweekly. How much of a benefit am I actually getting by going through this process? Can't I just claim my up to $5,000 on my tax return at the end of the year and get the same tax break?

Answer 1

If you look at the 2441, you will see that the percentage for the credit is inversely related to your income. In other words the more you make the less of a credit you get.

It is better to use the FSA than take the credit. You still need to file the 2441, though. If you don't, you will be taxed on the money in the FSA and lose the money as well.

Answer 2

Really, there's no difference between using a Dependent Care FSA vs taking the Child Care credit at the end of the tax year. The tax benefit would be the same: the FSA is all about using pretax money, while the credit is a $ for $ refund on the taxes on money used to pay for child care.

I suppose you could collect your receipts and wait until the following year to take the deduction.

Question is: can you wait until the following year to claim the credit? I'd think being able to get reimbursed throughout the year would be a good thing, since you can get the pretax money back whenever you file, then turn around and pay it out again to your child care provider.

Answer 3

There are limits on the dependent care credit. Amount depends on whether you have one child or more than one. Which is better for you, the credit or the FSA, depends on different things - check both ways to see which would work better and give you more benefit. It's very unlikely to be equal.

Answer 4

i do no longer use it. i'm uncertain how i might ever plan thus. There are advantages and hazards, and the 1st poster enormously lots summed those up. Supposedly you may as properly get reimbursed for OTC drugs contained in direction of the plan we've. i comprehend people here who use it and prefer it. yet we do no longer extremely have any prescriptions we tackle a recurring foundation, and all the different scientific stuff - i could no longer positioned a dollar quantity to that. We the two have insurance, so we infrequently pay something in any respect besides (secondary ins. even will pay our co-will pay). Angela isn't in day care anymore, and we at the instant are not making plans to deliver the two of the girls back after my maternity depart. For us it does no longer be properly worth it in any respect. i comprehend that, under specific circumstances, between the advantages is that in case you have been to request - say - $5,000 be put in and you used all that up in the previous you paid all of it off... in case you acquire enable bypass out of your corporation, they could no longer come when you for the money. (i do no longer comprehend if all people's works a similar, yet my corporation places each and every of the money in on the initiating of the year, and you pay it off over twelve months by using payroll deduction....)