Dependent Care Credit & FSA

[nridhibh]

Turbo Tax is stating we don't qualify for the Dependent Care Credit. My W2 shows $5,000 in dependent care benefits in Box 10, which reflects the money I contributed to an FSA. We have $14,431 in childcare expenses and meet the other requirements for the Dependent Care Credit (both working etc.). I understand the FSA money should be subtracted from the $14,431, but this still leaves $9,431 that should qualify, right? I understand only $3,000 of the $9,431 would qualify based on the max for one child.  At 20% (based on our AGI), shouldn't we be seeing $600 back on our return?

[Opus 17]

The credit does not stack on top of the dependent care benefit.  You have already used up your $3000 eligibility by using a $5000 FSA. 

[nridhibh]

Thanks for your response. To clarify, because I already received over $600 in tax benefits ($600 being equivalent to 20% of the $3,00 dependent care credit limit)  through my FSA?

[Mike9241]

@nridhibh  i would suggest you look at form 2441. that's where the credit is calculated.  start with part III because you got dependent care benefits.

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with 1 qualifying child you would get no credit with 2 or more  you would at most get a credit of from 20% to 35% (the excess of $6K over the $5K  of benefits) based on your agi but could b less if your tax liability was less than the credit

[Opus 17]

@nridhibh 

No, because you received a $5000 dependent care benefit at work, you have no eligibility left to apply the credit for other expenses.  $3000 minus $5000 is less than zero.  

[CatinaT1]

Since you had money withheld pre-tax, you can't also take the credit.  You received tax benefit already by having it withheld pre-tax.  

Since you only have one child, you receive a greater benefit by using the FSA rather than using the Credit.   

The only way to have the pre-tax money withheld and take the credit is if you have more than one child. The credit limits you to $3,000 of qualified expenses for one child or $6,000 for two or more children.   If you had 2 or more children you would still have $1,000 to apply to the credit that hasn't received any tax benefit. 

This link will tell you more: Child and Dependent Care Credit