Question 1

For my work-related dependent care expenses I can use the Federal tax credit on my tax return. Which is better, the dependent care FSA or the tax credit?

admin · Accepted Answer

In general, if your total household income is less than $25,000, the Federal tax credit is better. The dependent care FSA is probably better if your income is higher than $25,000. The FSA may also be better because it has a lump sum limit of $5,000 for all work-related child care expenses regardless of the number of children. The Federal credit is a percentage of expenses. You should check with your tax advisor to be sure.

Question 2

For my work-related dependent care expenses I can use the Federal tax credit on my tax return. Which is better, the dependent care FSA or the tax credit?

admin · Accepted Answer

In general, if your total household income is less than $25,000, the Federal tax credit is better. The dependent care FSA is probably better if your income is higher than $25,000. The FSA may also be better because it has a lump sum limit of $5,000 for all work-related child care expenses regardless of the number of children. The Federal credit is a percentage of expenses. You should check with your tax advisor to be sure.