@kkunkle the limit of $5,000 for the FSA is different from the $3,000 per child limit for the Child and Dependent Care Creidt. Also, the handling of the pre-tax FSA dollars is different from the handling of after-tax dollars that you spent on dependent care.
The way the law is phrased, you can apply up to $3,000 in child care expenses to the Child and Dependent Care Credit, per child, with a maximum of two children. One child, $3,000 max; 2 or more children, $6,000 max.
If you have a dependent care FSA, then the money for those expenses is taken from the FSA first. But a dependent care FSA is limit to $5,000. So, in this case, with one child, the entire $3,000 would come out of the FSA. Since the dollars in the FSA are already tax-advantaged, you cannot get an additional tax-advantage by applying them to the Child and Dependent Care Credit.
But in the case of two children, you can apply only $5,000 from the FSA to the kids. This leaves $1,000 ($6,000 - $5,000) available to apply to the Child and Dependent Care Credit. The expense over and above the $6,000 has no tax benefit.
