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I entered all provider expenses ($25K) correctly (Form 2441). So why does W2 Box 10 value $5,000 (aka the maximum Dep Care FSA value) increase my tax bill by $1,000?
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June 6, 2019
8:09 AM
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Deductions & credits
The $5,000 in Box 10 decreases your child care credit. You can only use up to $3,000 in child care expenses per child to determine the credit, regardless of what you paid, and the $5,000 is subtracted from that limit amount. So, for example, if you have 2 children in care, you're allowed to use $6,000 of expenses towards the credit. The $5,000 in Box 10 reduces your allowable expense for the credit to $1,000. The box 10 amount is a sum for which you have already received a tax break because it was not taxable income to you.
June 6, 2019
8:09 AM