I have entered child care expenses into my federal tax return that are greater than $9,600, which have transferred into my Massachusetts state tax return. I have 2 dependents and am married filing jointly.
Massachusetts allows you to take 1 of 2 child related deductions (whichever is greater):
* Child care expenses deduction (up to $9,600 for married filing jointly), OR
* Dependent member(s) of household deduction (up to $7,200 for 2 or more dependents)
I expect to take the $9,600 deduction. On the "Massachusetts Child Care Deduction" page, it says that I am eligible for a deduction of $4,600 in Massachusetts. I believe this to be correct, and that it is the $9,600 less the $5,000 of employer sponsored Dependent Care Benefits deducted from payroll into my Flexible Spending Account.
However, when I look at the details underlying my return, it shows that I am only getting a total deduction of $7,200, as if it is applying the "Dependent members of household" deduction. Is there a reason it is not applying the higher "Child care expenses" deduction of $9,600?
I have entered the same exact information into TaxAct, and they have applied the $9,600 deduction, resulting in a higher return of $120. $9,600 - $7200 = $2,400 difference * 5% tax rate = $120.
