For 2023, unless Congress passes new tax law changes (which seems unlikely), the FSA and child care credit rules are going back to their pre-COVID amounts. In that situation, the two plans are almost identical in benefits for adjusted gross income less than $125,000. Above $125,000, the FSA is better. However, this also depends on filing status.
For the credit only, you would report up to $6000 of expenses and get a 20% credit, or $1200.
For the FSA, you would exclude income tax on $5000 of income, and claim a 20% credit on $1000 of expenses.
There is where things get complicated. Suppose you earn $80,000 and are married filing jointly. You are in the 12% bracket, so the $5000 exclusion saves you $600, plus the income is excluded from social security and Medicare, which saves $382, plus the $200 credit on the top $1000 ox expenses, totals $1182. But, suppose you are MFJ and you earn $150,000. You are in the 22% bracket so you save $1100 in income tax, but you only save $72 in medicare tax since you are over the social security maximum wage base so an income exclusion doesn't reduce your SS tax, plus the $200 top credit totals $1372.
If you can afford to pay $35K in child care expenses you are probably at an income level where the FSA is more beneficial.
