I have entered child care expenses into my federal tax return that are greater than $9,600, which have transferred into my Massachusetts state tax return. I have 2 dependents and am married filing jointly.
Massachusetts allows you to take 1 of 2 child related deductions (whichever is greater):
* Child care expenses deduction (up to $9,600 for married filing jointly), OR
* Dependent member(s) of household deduction (up to $7,200 for 2 or more dependents)
I expect to take the $9,600 deduction. On the "Massachusetts Child Care Deduction" page, it says that I am eligible for a deduction of $4,600 in Massachusetts. I believe this to be correct, and that it is the $9,600 less the $5,000 of employer sponsored Dependent Care Benefits deducted from payroll into my Flexible Spending Account.
However, when I look at the details underlying my return, it shows that I am only getting a total deduction of $7,200, as if it is applying the "Dependent members of household" deduction. Is there a reason it is not applying the higher "Child care expenses" deduction of $9,600?
I have entered the same exact information into TaxAct, and they have applied the $9,600 deduction, resulting in a higher return of $120. $9,600 - $7200 = $2,400 difference * 5% tax rate = $120.
Yes. Your $9,600 deduction would be reduced by the amount of employer sponsored benefits (from your W-2 in Box 10). This would lower the deduction down to $4,600. Since $7,200 is greater than $4,600, TurboTax automatically applied what was most beneficial to your tax situation.
When you entered this information in the other program, did you also enter the dependent care benefits in Box 10? This amount is pre-tax dollars. Pre-tax benefits cannot also be deducted as an expense on your return. Only the amount of child care expenses paid with after tax dollars is deductible.
Yes. Your $9,600 deduction would be reduced by the amount of employer sponsored benefits (from your W-2 in Box 10). This would lower the deduction down to $4,600. Since $7,200 is greater than $4,600, TurboTax automatically applied what was most beneficial to your tax situation.
When you entered this information in the other program, did you also enter the dependent care benefits in Box 10? This amount is pre-tax dollars. Pre-tax benefits cannot also be deducted as an expense on your return. Only the amount of child care expenses paid with after tax dollars is deductible.