We spent $22,210 on dependent care in 2022 with a $10,000 FSA but turbo tax says I don't qualify for the dependent care credit, why don't I qualify?

[max-ehr]

I've seen a lot of conflicting things about how you can qualify for this credit and turbo tax tells me no reason it just says "you don't qualify". There's a note that says I have an employer-provided care benefit of $10,000 which I assume is the FSA reported on my W2. The note says if the expenses are more than this amount I can receive the credit. The total expenses were $22,210 so shouldn't I qualify? Based on our income bracket and some online resources I think I should have a $1600 credit

[JohnW152]

It sounds like you should be getting the credit, but there is a phaseout in the credit percentage you can claim, based on income.  The percentage depends on your adjusted gross income (AGI), with a higher percentage applying to lower incomes and vice-versa.

You can see the phaseout percentages on page 7 of the 2021 Instructions for Form 2441.  If this doesn’t appear to be the issue, please reply back with more details, including your AGI.

You might preview your return, to see what’s going on with Form 2441:

1. Open or continue your return.

2. Select Tax Tools in the left pane (if this isn’t on your screen, select the menu icon in the upper-left corner).

3. With the Tax Tools menu open, you can:

   • View the entire return: Select Print Center and then Print, Save, or Preview This Year's Return (you may be asked to register or pay first).

[max-ehr]

It looks like AGI isn't a problem, based on that table (and this tracks with what I had looked up previously) our multiplier is 0.2

The instructions for previewing the form were very helpful so I was able to pull our form 2441 from that. The issue seems to be in Part III:

Line 27: $8,000

Line 28: $10,000 (from the FSA)

Line 29:  $-2,000 (subtract line 28 from line 27)

if line 29 < 0 then presumably we don't qualify for the credit because we already had more than $8,000 in in benefits.

Although I am still not convinced that this is filled out correctly and it seems needlessly confusing. Does it make sense to you?

[RaifH · Accepted solution]

You are not eligible for the credit because your FSA benefits exceed the $8,000 limit per child. This amount is reflected in Box 10 of your W-2s.

The credit is based on a maximum of $8,000 for one child and is reduced for every dollar of childcare you paid using pre-tax income. Since your dependent care from your FSA exceeds $8,000, you cannot claim the credit.