Box 10 of my W2 is $5,000. We paid $8,900 total in daycare expenses. We qualify for the Dependent Care Credit. Why is it not giving it to us?

[alnewman66]

I have checked to make sure we qualify for the credit and provided the EIN for our daycare.  When entering the amount paid, it even notes that we have $5,000 in dependent care benefits and the number entered must be above that to qualify.  Our number is $8,900 but still denies us.

[JamesG1]

You may have received pre-tax child care benefits that are reported in box 10 of your W-2.  The credit may not be available to you because you already received a pre-tax benefit reported in box 10 of your W-2.

IRS Instructions for form 2441 page 1 states:

Dependent care benefits may include: 

• Amounts your employer paid directly to either you or your care provider for the care of your qualifying person(s) while you worked, 
• The fair market value of care in a daycare facility provided or sponsored by your employer, and 
• Pre-tax contributions you made under a dependent care FSA. 

Your salary may have been reduced to pay for these benefits. If you received dependent care benefits as an employee, they should be shown in box 10 of your Form W-2, Wage and Tax Statement.

[Mike9241]

review form 2441 starting with part III part II is not applicable in your case. 

[Opus 17]

The credit does not stack on top of the dependent care benefit.  The credit is available on the first $3000 of expenses for one child and $6000 for two or more children, but any workplace benefit reduces that limit.  Because you had $5000 of workplace benefits, you could use $1000 of the care cost toward the credit if you were paying for 2 children, but if you only have 1 child, you have used up the $3000 eligibility for the credit.

Note that the workplace benefit is much better financially than the credit, for anyone whose income is more than $35,000.