Midway through 2023, Pennsylvania changed its version of the Dependent Care Credit to be a 100% match of the federal Dependent Care Credit. This offers us a potential tax credit of $2400 ($1200 x 2). The problem is that we opted to contribute $5000 in pre-tax dollars to our dependent care FSA because at the time, the tax savings from the FSA was the better deal. But now that PA has changed its rules, I am wondering whether I can pay taxes on the $5000 contributed to our FSA after the fact, perhaps by adding $5000 to Boxes 1, 3, and 5 of my W-2. Is this allowed? Is there a better method?
A couple more details, for those interested... We have over $12,000 in daycare expenses for two children ($5000 of which were paid by the FSA), so we'd definitely max out the Dependent Care Credit without the FSA contributions. Also, PA taxes DCFSA contributions, so we only save on federal and FICA taxes by making pre-tax contributions to the FSA. I ran the numbers and with PA's change, we would get roughly $1000 more once we file. Any advice on how to "change my mind" after the fact would be appreciated. Thanks!
