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?

[TK986]

@Opus 17 

If I live in a community property state, file MFS, claim the kids, and have the DC FSA account, can I still only contribute $2,500?  I’ll have to split income with my spouse anyways if I contribute the entire $5,000.

[Opus 17]

@TK986 

Correct. Even in a community property state, the dependent care credit is disallowed, and the maximum FSA exclusion amount is $2500.

[setcpa]

In Ohio, couples making about the same amount are usually better filing MFS.

[AmyC]

If you have rental real estate losses, kids, low income, and more then you should carefully review whether to file MFS or MFJ. Here is a great article by Turbo Tax on MFJ vs MFS.

@setcpa

[setcpa]

Yes, you are correct.  However, most of my clients are very high income and are phased out of most of that anyways.  Ohio is a strange state. 🙂

[sivadbop]

Some PSLF misinformation here very much worth clearing up and not scaring people out of smart financial decisions.

1. Loans forgiven under PSLF are very much not considered taxable income. It's the first bolded hit on a google search but here ya go. Wiped out. No tax. Bada bing.

2. There were a ton of failed PSLF applications early-on. The program was a mess, and a lot of borrowers with different types of loans, and those who had consolidated mid-way, were told that they had non-qualifying payments, or had to start over. There are specific new laws and programs intended to correct some of that confusion, and the system has been almost completely overhauled. If one has the right types of loans (Federal Direct), and has had the loans consistently over the repayment period, the program does in fact work.

Telling someone to make a decision on whether to pursue PSLF w/ IBR by asking them to look at the "success rate" circa 2017, instead of actually researching and clarifying whether they qualify (as if it's a roll of the dice), is incredibly bad advice. 

[Opus 17]

@sivadbop 

The date May 31, 2019 on the post that started this thread indicates that this thread was migrated over from the old support forum on that date, and the original discussion could very well be from 2017 or even earlier.  TurboTax keeps old threads because they contain historical knowledge and there are so many discussions that it would be impractical to try to review every old discussion and close or hide it when the situation or tax laws have changed.

[Varrgh]

From Pub 501 2022 page 7, Filing Status, Married Filing Separately, Special Rules, 3:
3. You can't take the credit for child and dependent care expenses in most cases, and the amount you can exclude from income under an employer's dependent care assistance program is limited to $2,500 (instead of $5,000 on a joint return).

Emphasis mine.

From Instructions for Form 2441 (2022), Who Can Take the Credit or Exclude Dependent Care Benefits?, Married Persons Filing Separately:

If you don't meet all of the requirements to be treated as unmarried, you can’t generally take the credit. However, you can generally take the exclusion if you meet items 2 through 5.

Emphasis from website.

The income exclusion (Dependent Care FSA) is allowed for both those filing MFS at half the amount for MFJ filings.

It's the credit that is disallowed for both individuals filing MFS except for one of those who can be treated as unmarried.

Perhaps this changed from the 2021 reply above to the 2022 publication. I want to note it since this thread was a top result for me when I searched "dependent care fsa married filing separately".

[MarilynG1]

When filing status is MFS, you will not be eligible for the Dependent Care Credit.  The amount shown on your W-2 for FSA (up to $2500) will be shown on Form 2441, Line 12 and will be Taxable Income on Line 26.

Be sure to indicate Spouse's Income as $0 on the form, in the Married Filing Separate Smart Worksheet section. 

The Spouse filing as HOH will be able to claim the credit and use their FSA contributions.

@Varrgh 

[JustHERE1]

@gretchen-peterso 

@Opus 17 

@MarilynG1 

Did you ever get this situation rectified? I am in the exact same situation for 2023.

[BillM223]

As note above, you cannot claim the Child and Dependent Care credit, unless you meet the special conditions under "Married Persons Filing Separately" on page 2 of the Instructions for form 2441.

You CAN, however, contribute to an FSA, if you have a dependent that qualifies you. Yes, the limit of the contribution to the FSA is $2,500 for each spouse. 

[JustHERE1]

@BillM223 

The way I read it as well, is we should each be able to contribute 2500 to our FSA and use that for dependent care expenses.

The problem is on box 10 of my w2 it lists 2500. When doing the child interview my wife claims the kid and then it tells me I am not eligible. I then have to pay 600 more in taxes which equates to the tax on the 2500. 

I don’t understand why TurboTax is taking that 2500 as taxable income.

[Mike9241]

from form 2441 instructions

Special rule for children of divorced or separated parents
or parents who live apart. Even if you can't claim your child as
a dependent, he or she is treated as your qualifying person if:
• The child was under age 13 or wasn't physically or mentally
able to care for themselves;
• The child received over half of his or her support during the
calendar year from one or both parents who are divorced or
legally separated under a decree of divorce or separate
maintenance, are separated under a written separation
agreement, or lived apart at all times during the last 6 months of
the calendar year;
• The child was in the custody of one or both parents for more
than half the year; and
• You were the child's custodial parent. (This is the problem)
Generally, the custodial parent is the parent with whom the
child lived for the greater number of nights in 2023. If the child
was with each parent for an equal number of nights, the
custodial parent is the parent with the higher adjusted gross

income. 
Generally, the noncustodial parent can't treat the child as a
qualifying person even if that parent is entitled to claim the child
as a dependent under the special rules for a child of divorced or
separated parents or parents who live apart.

[JustHERE1]

@Mike9241 

I’m guessing the issue is that we are married but filing separately but are not separated or divorced is the issue. Therefore only one of us should have opened the FSA dependent care account for 2500, not both. 

So it looks like I’ll have to take the tax hit of an additional 2500 to my income. Am I understanding this correctly?

[williasp]

You are correct.  If you read the entire thread, you will see there was considerable discussion about this.  According to pub 501, when you file MFS and do not claim the child as a dependent, that child is "non-qualifying" for dependent care expenses on your return.  My son fell exactly into this trap.  You open a dependent FSA at the beginning of the year, then learn at tax time 15 months later it was all for nought.