Hi albaclark,
Thank you for asking this question! Looks like Opus 17 hit reply just before I did, so thank you Opus 17! I'm just adding a few additional tidbits to an already great response:
The contribution limit set by the IRS for 2021 is up to $10,500 and is voluntary as you already stated. Since this is a company specific plan, you will only be able to contribute up to the limit set by your company. You will then be reimbursed for your qualified out of pocket expenses from the company up to their limit. When you complete your taxes in 2022, you will list the $5000 as paid with your FSA funds since that is the max amount your company would allow you to fund and claim. However, if you are eligible you can leverage the Child and Dependent Care Credit for the amount that didn’t go through your FSA. This credit will allow you to claim up to 50% of a maximum of $8000 in expenses for each qualifying child depending on your AGI (the percentage ranges from 0% to 50%).
I’ve added a link from the IRS below for common questions related to the 2021 Child and Dependent Care Credit:
Child and Dependent Care Credit FAQs | Internal Revenue Service (irs.gov)
I hope this helps and thanks again for asking the question!
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