flexible spending account saving vs child care credit?

Question

I'm trying to figure out which one gives more saving. My company provides a $5000 max in flexible spending account for dependent care. So with $5000 before tax, I could earn up to $1500/year for a 30% in income tax.

I don't know how much I can get if I claim for dependent care in my income tax return. I have one child and I would have to paid about 30% for income tax.

Has anyone compare these two before? which one is better for you?

Answer 1

In my case, the credit worked out to be better. BUT, it's different in every case. It would be to your benefit to sit down with a tax professional and figure out what is best for your specific situation. It is going to be different for each individual, depending on what other credits you might have, your actual income and tax bracket, and a few other factors.
Call and make an appointment with someone. But before you do, ask questions. How manyyears have they been doing this? How familiar are they with flex spending accounts and the Child and Dependent Care credit? How much training do they have every year?
Good luck! Let me know if I can be of further assistance.

Answer 2

Figure it both ways - look at form 2441 to estimate what your credit would be, and take the FSA amount times your tax bracket, and go for whichever is larger. You can't claim the same expense for both, but if your actual expenses are larger than the limit for one, you might be able to use the rest for the other benefit.

If your income, or your joint income if you are married, is over $43K, your maximum child care credit for one child would be $600.

Answer 3

The Child Care Credit is going to be worth at most $600 to you (20% of $3,000). A $5,000 reduction in your income, to be spent tax-free for child care, will reduce your taxes by between $750 and $1,250 dollars, plus reduce your SS and Medicare taxes by $383, plus reduce your state income taxes. The FSA is worth more to you than the Child Care Credit because you are in a high tax bracket and pay more than $3,000 in child care.

Answer 4

Go to the IRS website (IRS.gov), & read up on it (1040 instruction booklet) Also, there may be a few work sheets for you to mess with.
The Fex spending accout will likely save you more, but keep in mind, any $ you don't use, you lose!