Showing I don't qualify for dependent care credit?

Forum|Forum|4 months ago
January 21, 2026
2 replies
4 views

Hello, so I entered my and my wife's income (married filing jointly), my child's information, her daycare's information, my FSA information, and yet it still says we don't qualify for the dependent care credit even though we paid $28000 (after subtracting the FSA portion). I read online that there is no income limit for getting the 20% credit ($600 for one child) so what seems to be the problem? Thanks.

Best answer by Opus 17

Expert Reviewed

@sammashat2 wrote:

But you're saying here that the FSA of $4000 is subtracted not from our total daycare expenses, but from the $3000 limit? (which makes it below $0)

Correct. You can't stack the credit on top of the FSA. For one child, you can have a $5000 FSA or a $3000 credit but not both. For 2 children, you could claim a $1000 credit on top of a $5000 FSA.

Because the FSA excludes income from social security and medicare care tax as well as income tax, it is a better deal than the credit for almost everyone.

MinhT1

Level 15

There is a dollar limit on the amount of your work-related expenses you can use to figure the Child and Dependent care credit. For 2024, this limit is the lower of actual expenses or $3,000 if you had one qualifying person, or $6,000 if you had two or more qualifying persons.

If you received dependent care benefits that you exclude or deduct from your income (such as a contribution to a Dependent Care FSA), you must subtract that amount from the dollar limit that applies to you.

In your case, the dollar limit is $3,000 and if your FSA deduction is $3,000 or more, you can no longer claim the Child and Dependent care credit.

Please read this IRS publication page 12, for more information.

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sammashat2Author

Level 2

Oh I see, thanks for clarifying.

So just to confirm: I thought that the way the dependent care credit was calculated was as follows: Total Daycare Expenses ($33,000 in our case) minus FSA ($4000 in our case) = Eligible Expenses ($29000)

Then, of that $29,000, we're only allowed a credit of 20% of $3000 (for one qualifying child), which makes $600.

But you're saying here that the FSA of $4000 is subtracted not from our total daycare expenses, but from the $3000 limit? (which makes it below $0)

Opus 17

Answer

Level 15

Expert Reviewed

@sammashat2 wrote:

But you're saying here that the FSA of $4000 is subtracted not from our total daycare expenses, but from the $3000 limit? (which makes it below $0)

Correct. You can't stack the credit on top of the FSA. For one child, you can have a $5000 FSA or a $3000 credit but not both. For 2 children, you could claim a $1000 credit on top of a $5000 FSA.

Because the FSA excludes income from social security and medicare care tax as well as income tax, it is a better deal than the credit for almost everyone.