Deductions & credits
Thanks for the prompt reply.
Your plan at work allows you to use the funds in 2024. Which is cool - in 2024 you will not have a payout shown on your W2 so you will get a deduction for the 2023 payout.
I don't understand this part completely. I referred to the pub 503 and specifically this section:
Expenses prepaid in an earlier year.
If you pay for services before they are provided, you can count the prepaid expenses only in the year the care is received. Claim the expenses for the later year as if they were actually paid in that later year.
So if I am understanding correctly what you are saying is similar to this. In 2023, the 3600 will be considered taxable and I will need to pay taxes on it. I cannot claim it in 2023 tax return since the service was provided in 2024 and I will claim this in 2024 tax return instead.
So in 2023 this section will be empty/0.
Should I still do something in this section for 2023 to report that I prepaid the child care agency in 2023 I see this section which ask for 2023 year payment.
I am also contributing maximum limit 5k in DCFSA for 2024 which will be used in 2024 itself. So next year when I go for filing 2024 I will claim 5000 + 3600 (from 2023) = 8600 as child care expense the above section in TurboTax. I see that in that section TurboTax as if there was any carryover used from previous year in this year. Current year (2023) screenshot example:
Is this correct? Later on in the section I see that it says that I can only get credit for up to 3000 for one dependent and 6000 for two dependents. I thought whole 5000 max contribution is tax deductible per year. Is this not correct?
