We file MFS. I put $2500 in my dependent FSA. Can my wife put $2500 in her FSA too? Will I/we be able to claim the money as childcare credit on our taxes?

[gretchen-peterso]

My wife and I do our taxes married filing separately (for student loan reasons). We have a daughter, and for the past two years, I have used the dependent FSA at my work, and put $2500 in it (since we are MFS). My wife just got a new job, and for the first time, also has an FSA. Can she also take $2500, or can only the parent claiming our daughter as a dependent do that? Will I (or we) be able to claim the money we put into the FSA(s) as a childcare credit on our taxes, or is this not allowed since we are not separated? I thought I understood this, but my online research has gotten me more and more confused

[SweetieJean]

Okay, why are you filing separately? It costs more taxwise than Joint..

[gretchen-peterso]

For student loan reasons.  In order to qualify for IBR and keep my student loan payments as low as possible (I'm a public interest attorney), we have to file MFS.  5 more years to go, and we'll start filing MFJ.

[AnnaB · Accepted solution]

Taxpayers using the Married Filing Separately status do not qualify for the dependent care credit.

In addition, funds put into an FSA for dependent care are already "pre-tax".  This means you've already gotten a tax benefit for these amounts.  Therefore, no additional credit would be allowed for the same amount.  If you have expenses in excess of the FSA and use a different filing status, then you may still qualify for a dependent care credit.

In regards to putting money into both of your FSA's, the rules say taxpayers that are filing separately can put up to $2,500 into their FSA.  This means that each of you can put the maximum of $2,500 into your Dependent Care FSA; however, you can only use your dependent care expenses one time when requesting reimbursement.

When you prepare your tax returns, the spouse that does not intend to claim the child should still enter them as a dependent and indicate that the other parent will claim the child.  This allows the child to show up in the Dependent Care Credit section for determining if you had any excess FSA benefits that may be taxable.

[gretchen-peterso]

Thank you for your helpful response.  Just to clarify, do you mean both spouses can deposit in an FSA, even if only one of them is claiming the child as a dependent?  It sounds like from you last paragraph that even if we can, it may not be a good idea, since there could be a tax penalty?

[AnnaB]

There would not be a penalty, you just would not be able to answer the Dependent Care Credit questions to determine if any part is taxable without doing so.  This could happen if you guys had $5,000 in your FSA's and only paid $3,000 in dependent care.  That could trigger $2,000 to become taxable since you don't pay taxes when you contribute.

[jtm260]

Post on an old thread. But, specifically, how do you, in TurboTax,

1./ When you prepare your tax returns, the spouse that does not intend to claim the child should still enter them as a dependent and indicate that the other parent will claim the child.

Thanks.

[Opus 17]

When you are filing MFS, the best thing to do is for the spouse who will not claim the child to simply delete the child or never list them in the first place.  There are questions in the interview that pertain to custody issues that are sometimes answered incorrectly by parents who are unmarried but live together, or by parents who are married but filing separately.   The interview is not structured very well in my opinion.

[cc11jimmy]

Thank you for the response. What you mean by "you can only use your dependent care expenses one time when requesting reimbursement."?

I'm in a similar situation: my wife and I are MFS with one daughter which will be claimed by only one of us. We each contributed $2500 into our own FSA and the daycare expense is definitely more than $5000. I understand the child credit is different than the expense deducted from our income and we will not be able to claim the credit. But regarding the expenses, are you saying we can only reimburse $2500 and what happen to the other $2500 we contributed to MFS? Are we not able to use it and is it just lost? Thank you.

[Opus 17]

Each expense can only be reimbursed by one plan.  Both parents can't claim the same day care bill for reimbursement.

[cc11jimmy]

Thank you Opus. I didn't mean to reimburse same expense twice. Was thinking have my wife reimburse first half year of expense and I reimburse the second half. But as I read your response below, it seems we can each reimburse $2500 however, only one person can get the reduction in income. The other person's $2500 will be add back to income, which makes it as if it is paid with after tax dollars. Did I understand you correctly? I would not lose the $2500, but just have to pay income tax on it? Thank you.

[Opus 17]

Yes, you really shouldn't have an FSA at all if you are the spouse who is filing MFS and will not claim the child as a dependent.  Since you do have an FSA, submitting the bills for reimbursement and then paying the income tax is obviously better than forfeiting the account and still having to pay the bills.

[williasp]

I see this is an old thread. 

Please be specific.  If I am the parent who is NOT claiming the child as a dependent, but I am the parent with the FSA account, where and how in TT do I enter the information regarding the FSA account and the expenses that were reimbursed.

[MaryM428]

As long as you are the custodial parent you can claim the credit even though you are not claiming the child as a dependent. 

You will enter the child as a non-dependent and then follow these steps in TurboTax

To Add a Childcare Provider in TurboTax Online:

1. Go to "Federal Taxes" at the top of the screen

2. Select "Deductions & Credits"

3. Scroll down to "You and Your Family" and select "Show More"

4. Select "Start" next to "Child and Dependent Care Credit"

5. Select "Yes" to "Did you pay for child or dependent care in 2016?"

6. Select "Continue" on the Add Dependents page and proceed to enter your info for the credit

For general information on the Child and Dependent Care Tax Credit visit this link: Child and Dependent Care Tax Credit

@williasp 

[williasp]

@MaryM428 

I've now spent several hours looking at the 2441 form (in forms view) as well as the child worksheet.  I've also gone through the interview process several times, but with no luck.

The W2 box 10 info specifying the dependent care FSA carries over to the 2441.  But there is no way I can see to input and subtract out payments made to child care providers.  So if I input the name, address etc of the child care provider and indicate the payment, that payment doesn't show up in any lines below.  I can try to override certain lines, but that will result in an error exclamation point.  No matter what check boxes I check, it seems that once I am in MFS mode, the dependent care expenses are "non-qualifying."  Again, I am not trying to get the child tax credit.  I am simply trying to zero out the FSA account so it is non-taxable.  This seems to be a bug in the program because when I read the IRS instructions, it sounds like FSA expenses can be taken if one files MFS.