FSA/Child and Dependent Care Credit Question?

[cricketcreek]

Can you clarify this FSA/Child and Dependent Care Credit question for me?  Married Filing Jointly, 2 Children, Child #1- $9068 in childcare expenses, Child #2 - $6996 in expenses.  Total - $16064.  We funded my wife's FSA with $5000.  Is it true that this only allows us to claim the remaining $1000 under the Child and Dependent Care Credit?  I would think we could claim the entire $6000 since we spent more than that over and above the $5000 we put into the FSA.  The FSA was not funded by the employer.

[Critter · Accepted solution]

 Is it true that this only allows us to claim the remaining $1000 under the Child and Dependent Care Credit?

Yes it is ... you only get the CREDIT on the amount over the $5000 you put in the FSA because you already got the tax benefit on that $5K when you made the FSA contribution.   You saved Federal + State + local taxes as well as the FICA taxes.  

So, for instance,  if you are in the 20% federal & 5% state tax brackets you saved :

$5K x (25% + 7.65% FICA) = $1633 instead of the $1000 on the credit form ... so you are ahead of the game which is why the FSA is so popular.