As rjs and the IRS topic and this link to IRS Publication 503 explain, you reduce the allowable expenses limit by the amount of FSA that reduced your taxable income.
For example, you have two daycare age children; you and your spouse both have earned income above 6,000 each.
Your FSA benefit was 5000. The expense limit for two children is 6000 minus the 5000 FSA, leaving 1,000.
You paid 3000 out of pocket for child care, but only 1,000 of that can be used for the Child and Dependent Care Credit calculation due to the expense limit.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
