Michael Nickerson CPA, MSFP: Boost tax savings on child care
Uncle Sam is aware of how expensive child care can be. That's why there is a dependent care credit available to trim the tax due on your income tax return. In addition, many people are able to fund dependent care costs through a flexible spending account at work. Can you?
You can't deduct those costs twice-taking the same spending against both your FSA and your child tax credit. But the maximum dependent care costs you can fund through your FSA is $5,000. And the tax credit applies to as much as $6,000 of eligible expenses for filers with two or more children.
Solution: Cover the first $5,000 of dependent care cost through your FSA; the remaining $1,000 can be used for the tax credit (Form 2441). That could result in an extra savings of $200 on the tax bill for most filers.
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