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timlee6
New Member

Wife is now highly compensated employee, so her employer automatically reduced her DCFSA contribution limit to $2,200 after 2018 already started. What should I do?

Are we still eligible for the $5k max DCFSA limit as joint filers?  Should my employer allow me to initiate a DCFSA so I can put the remaining $2,800?  What is the difference between pursuing this add'l benefit vs the Child and Dependent Care Tax Credit?
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CarolC
Level 6

Wife is now highly compensated employee, so her employer automatically reduced her DCFSA contribution limit to $2,200 after 2018 already started. What should I do?

As long as you are filing Married Filing Jointly, either spouse can elect to exclude a combined total of $5,000 from gross income under an employer dependent-care benefit plan.  If your employer offers this plan to you as well, then you could elect to exclude the remaining $2,800 from your gross income. 
 
Taxpayers can take advantage of both the Dependent Care FSA and the Child and Dependent Care Credit.  However, when calculating the tax credit, you must reduce your total expenses by the amount received from the DCFSA(s).

The DCFSA allows expenses to be deducted from your taxable income.  Generally, the higher your income, the higher your tax savings.  The Child and Dependent Care Credit is a credit that is a percentage of the expense.  The percentage decreases as income rises.

See this TurboTax FAQ What is the Child and Dependent Care Credit? for additional information.
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