Hi
So the best way to review these is to give you an example. Also, the Child Tax Credit looks to be possibly extending (at least for 2022) but the expanded Depending Care Credit is not.
I'm going to give an example with 2 kids (both over the age of 5, income is under any phase out)
For Child Tax credit you would be eligible for $6000
For Dependent Care Credit let's say you did max FSA (expanded with the March 2021 tax law change) but also spent the max on care:
$8000 per child max = $16,000
less max FSA of $10,500
Amount available for figuring credit = $5,500
$5,500 x max credit allowed of 50% = $2,750
For 2021 both of these credits are fully refundable - so no matter what your tax liability is you would have $8,750 ($6,000 + $2,750) to not only offset your tax liability but to also get a refund. So if you tax liability was $5,000 you would get an additional $3,750 in refund.
The amount you put in the FSA can only reduce the amount of Dependent Care that is eligible for the Dependent care credit (see the $5,500 above).
The only time it can affect the Child Tax Credit is if you "over fund" your FSA (and some of it becomes taxable income). That additional income could push you into a lower Child Tax Credit amount.
Le me know if that's not clear (sometimes things are clear in my head but I don't convey it well in writting).
Lisa
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