Married Filing Separately - Dependent Care FSA & C...
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MikeCP34
New Member

Married Filing Separately - Dependent Care FSA & Child Tax Credit

My wife is a school teacher enrolled in the PSLF program.  She must be on a PAYE repayment plan to remain qualified.  In an effort to keep her student loan payments as low as possible we are married filing separately.

 

I have a dependent care FSA that I use to pay for daycare expenses.  My wife does not.  Am I required to claim our child as a dependent if I use a DCFSA? 

 

Essentially, could I use the DCFSA but have my wife claim our child as a dependent so she could receive the "Child Tax Credit" (not the "Child and Dependent Care Tax Credit")?

 

3 Replies
DoninGA
Level 15

Married Filing Separately - Dependent Care FSA & Child Tax Credit

If you are legally married and living with your spouse then if you file as Married Filing Separately neither of you are eligible for claiming the child and dependent care expenses or the tax credit for those expenses on your tax return.

Whomever claims the child as a dependent would be eligible for the Child Tax Credit on their tax return.

Critter
Level 15

Married Filing Separately - Dependent Care FSA & Child Tax Credit

I have a dependent care FSA that I use to pay for daycare expenses.  My wife does not.  Am I required to claim our child as a dependent if I use a DCFSA?  

 

Since you cannot get the child care credit when you file separately the FSA is useless ... all the money you set aside will be added back into your income on the tax return. 

 

Essentially, could I use the DCFSA but have my wife claim our child as a dependent so she could receive the "Child Tax Credit" (not the "Child and Dependent Care Tax Credit")?  

 

Again, since you cannot claim the form 2441 when filing separately then only  one of you can choose to claim the child and the related child tax credit ... if you both try to claim the child the IRS will step in to break the tie. 

Anonymous
Not applicable

Married Filing Separately - Dependent Care FSA & Child Tax Credit

can't be sure but even ignoring the loss of credits and other deductions, MFS usually results in higher total income taxes than MFJ.     so what you save on student loan payments may be lost due to higher income taxes and loss of credits.  

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