Using dependent FSA and child care credit together.

[patrickc1]

My wife and I file jointly, we both work full time, 22% tax bracket, and have one child dependent in full time day care.

She has $5000 withheld from her paycheck thru work and placed in a dependent care FSA. This amount has been noted in box 10 of her W2. Our total daycare expenses are over $15,000 per year and have the proper documentation with EIN.  

Turbotax is telling me that we don't qualify for the Child and Dependent Care Credit. I understand that you're not allowed to double dip the same child care dollars when looking at the deduction and credit (which would be the case if you have less than $5000 expenses). I'm confused because we are paying over $10,000 in out of pocket child care expenses not paid for by the $5,000 in pre-tax FSA dollars.  So it seems we have more than enough non double dipped expenses to take advantage of the $3000 qualifying expenses.

Am I missing something or is turbotax incorrect? Thank you.

[CatinaT1 · Accepted solution]

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

[patrickc1]

Thank you for the info and replying.