I'm not understanding your response, Mark. Wouldn't he have netted $500 more by not contributing to an FSA? Yes, he would have paid taxes on the $5,000 he contributed to the FSA, but he would have earned a credit at a higher rate on the $5,000 from the DCC.
I'm in a similar situation and wondering why I'm even contributing to an DC FSA now. I have 2 dependents and paid $17k in child care expenses in 2023. I contributed $5,000 to an FSA, and with my tax bracket at 12%, it resulted in savings of $600. I'll get an additional credit of $200 for the DCC (($6,000-$5,000)*20%) for a total tax reduction of $800. If I had not contributed to an FSA, I would be eligible for the full $6,000*20% for $1,200. Did I lose out on $400?
