@JamesFan wrote:
Is there possibility that all the $10000 is tax free since they're allowed in my FSA? This is my first time to see Dependent Care FSA rollover.
Not unless Congress passes another modification. Under the current law that applies in 2022, you get up to $5000 tax-free. It doesn't matter if it is coming from current contributions or a carryover.
Basically, for each year, you can choose the credit or the exclusion, but not both. (The math on which saves more money changes when the law changes, but the basic rule is always the same.) If you choose the credit for 2021, you can't use the carryover to take a double exclusion in 2022.
Using the full $16,000 credit and carrying the FSA funds over to next year is the best result financially under current law, as long as your AGI is less than about $165,000. If you think you can predict what Congress will do next year, you're smarter than I am.
