The credit is available for children 12 and under. If you have 2 children that are 12 or younger on Dec 31, 2019, you can receive a $6K credit. If you only have 1 child that is 12 or under, your credit will max out at $3K. With only 1 eligible child, and more than $3K in box 10, you won't be eligible for any Dependent Care credit and the amount over $3K that you received tax-free will be added back into your income. If you have expenses that can be applied to either child, apply them to the youngest child to reduce your taxable income.
If you are using the desktop software, use Forms Mode (click on Forms in the upper right corner) to view the Wages, etc. Wks, specifically Line 11 of that worksheet. The amount on LIne 11 represents the taxable portion of your dependent care benefits that show in Box 10 of your W-2(s). From this worksheet, you can see the interaction between your Box 10 contributions, your child care expenses, and Form 2441 (Dependent Care Credit).
When you enter your W-2, the entire amount(s) in Box 10 will show as taxable until you enter expenses for eligible children. When you enter your expenses, the taxable portion of these benefits goes down. Once your expenses (for the eligible child)(ren)) surpass the amounts in Box 10, Line 11 of the worksheet drops to zero and the Dependent Care Credit Form 2441 is generated.
In your example of $3733 in Box 10 contributions, you have to have 2 eligible children to receive any credit. If you do and your eligible expenses are $3500, you would see $233 on Line 11 of the worksheet, meaning $233 of your tax-free benefits are actually taxable and no dependent care credit would be given. If you had $5K of eligible expenses, Line 11 would be blank since none of it would be taxable and you would get an additional tax credit on Form 2441 of $1267.
If you have only 1 eligible child and $3733 of FSA contributions, the maximum expenses you can claim is $3K, which would still leave $733 on Line 11 as taxable and no dependent care credit. With expenses of $1500 (your example) for the eligible child, you would see $2233 of your contributions added back into your taxable income on Line 11 of the worksheet and no additional credit on Form 2441.
I know the screens do not display correctly, but you should be able to look at the worksheet and verify that your amounts are properly being applied. You can also see the total amount of expenses applied for each child on the Dependent Wks Part lll (Dependent Care Expenses). You will only see amounts for the child(ren) that was 12 or younger. @josef104
@jgualan @4brian780 @CKJDuty
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