how does a dependant care spending account work?

Question

do they take money out of my check? how does it work?serious answers please thanx

ok so how do i get money from the account so if i asked for 500 then divide it by 24 pay checks(est.) then that would be pretty much what they take out per check right?

and could i use the money for food or diapers i give to the babysitter?

Answer 1

like an FSA for you - I take out 500 per year
and do not pay taxes on it - so I save 75 in taxes
BUT - you have to spend it all - because if any is left over - our favorite UNCLE gets it in Washington

dependent care would be for you paying the bills for your parents or children - yep - get a professional to advise you
and get the same benefits as your FSA - and same warning
spend it all! (wisely) and keep all receipts!!!!!!!

our employer had us declare by Nov 30 for 2008

have a great 2008, too

Answer 2

They take money out of your paycheck pretax for the amount you specify, then you can get reimbursed from that account for money you spend on child care.

If you use this you can't take the child care credit for the amounts reimbursed from the dependent care spending account, since that money was never taxed in the first place.

Answer 3

A dependent care account works just like a flex plan health account. You set asside a certain amount of money each paycheck to pay the day care bill you would be paying anyway. You pay the day care with the money you put into the account. The benefit comes in the fact that the money (up to $5000) is not taxed at all. It will not show up on your W-2 at the end of the year, and if you are making between about $20000 and $30000 a year, your EIC (if qualified) will increase, saving you even more money. See a tax professional at HRBlock with the details of how much you earn and number of kids, etc., they can tell you if it is better than the chid care credit (which is another option).