I started a FSA for dependent care in 2017, but I'd rather pay expenses & claim the tax credit when I file my taxes. I changed my mind. Can I switch to tax credit?

[PiratesFan]

Can I use first deposit into FSA & then pay the rest of my 2017 childcare expenses out of pocket and still claim a tax credit?

[Opus 17 · Accepted solution]

You probably can't cancel the FSA, you would have to ask your employer.

If you can cancel, you can apply remaining expenses to the dependent care credit. 

But, the FSA saves more money for everyone whose income is more than about $18,000 per year.

[PiratesFan]

Thank you. So I could theoretically split between an FSA and a dependent care credit as long as I don't claim tax credit for any expenses that was paid for out of the FSA, correct?

[Opus 17]

You can use up to $3000 of expenses toward the credit if you have one qualifying child, up to $6000 of expenses toward the credit if you have two or more qualifying children, and up to $5000 on an FSA no matter how many children.  Expenses paid with an FSA are not eligible to be applied to the credit also and they reduce the amount of room left under the credit cap.

So, if you had $500 reimbursed by an FSA, then you could have $2500 or $5500 applied to the credit, depending on how many qualifying children.  If you had $3500 reimbursed from an FSA, you can't apply anything to the credit if you have one child (you are already over the $3000 limit) but you could apply an additional $2500 of expenses to the credit if you had two or more children.

[PiratesFan]

THANK YOU! And does TurboTax make these distinctions for you? Meaning: If I have 1K reimbursed by an FSA, and I insert that I spent $5,000 on my 2 qualifying children, will TurboTax automatically do the math for me?

[Opus 17]

Yes, it's all part of form 2441.  Your FSA benefit is listed on box 10 of your W-2 so it is automatically captured, and then the program will ask additional questions such as did you forfeit any money, did you spend it on qualified care.  You will have to list your care providers and identify which children you paid expenses for, and the rest is automatic.