If you only had one child, you cannot take the credit. The credit is $3K of expenses for one child or $6K for two children. You are correct that when you enter the Box 10 amount ($5K), your tax goes up, because you have not entered the provider information yet. After you enter 5K worth of qualified expenses, that tax is removed. You got $5K of tax-free income from your FSA, so there is no credit left to take for the dependent care credit. You actually got more of a tax break (a $5K deduction) whereas if you did not have that, you would have been able to take a credit for only $3K Dependent Care Credit. @Montana Mom
Key Takeaways from the credit--
- If you paid someone to care for a child who was under age 13 when the care was provided and whom you claim as a dependent on your tax return, you may qualify for the Child and Dependent Care Credit.
- You also may qualify for the credit if you paid someone to care for your spouse or any other person claimed as a dependent on your return, if that person can't take care of himself or herself and has lived in your home at least half the year.
- To claim the credit, you (and your spouse, if you're married) must have income earned from a job and you must have paid for the care so that you could work or look for work.
- You can claim from 20% to 35% of your care expenses up to a maximum of $3,000 for one person, or $6,000 for two or more people (tax year 2023).
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