PA Taxes: Child Care Credit vs. Childcare FSA. Which is better?

[NAnspach]

Hi everyone. My spouse and I contribute $5000 to our childcare FSA for our two children. We always heard that this was a better deal than taking the full child care tax credit (joint taxable income is roughly $128k). However, Pennsylvania recently expanded its own child care tax credit to match 100% of the federal credit. Can someone please do the math for me -- does the pre-tax FSA still make the most sense, or should we opt for the federal credit now that its benefit is effectively doubled with PA's match? Thanks! 

[Bsch4477]

A dependent care FSA is often better for employees who can access it because the pre-tax deductions can substantially reduce the employees' income, Social Security, and Medicare taxes. Plus, it saves even more if your state imposes income tax and other types of taxes. But every situation is different. You would have to do your return both ways to see which is better for you. 

[NAnspach]

So I ran the numbers and it turns out that taking 2x of the Child Care Credit from the Federal & PA credits ($1200 x 2 = $2400) is the better deal for us -- especially since PA taxes FSA contributions. But now I am wondering whether I can pay taxes on the $5000 contributed to our FSA after the fact so I can be eligible for the full Child Care Credit. Perhaps by adding $5000 to Boxes 1, 3, and 5 of my W-2? Is this allowed? Is there a better method?

[DawnC]

Don't make any changes to your W-2.   It is too late to make changes for 2023.   You can stop the FSA for 2024, but for the return you are filing now.   You will only be eligible for the Child 

& Dependent Care Credit, for the difference between the $6000 (max) and the amount of your box 10 FSA benefits.   When you have the FSA, the amount you save in taxes may be greater than what you get with the credit, but that is not always the case.