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why did my refund go down (taxes go up) when i entered my child care expenses? i expected it to go up since we qualify for the child and dependent care credit

i was surprised to see my refund go down when i entered the child care expenses for my first child; and then down even more when i entered expenses for my second child.  why did it do this? 

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1 Reply
ColeenD3
Expert Alumni

why did my refund go down (taxes go up) when i entered my child care expenses? i expected it to go up since we qualify for the child and dependent care credit

Did you have an FSA?  This may make some of your benefits taxable is not used correctly.

 

Please see this answer from @BillM223:

 

Go through the child and dependent care interview (look under Deductions & Credits->Family->Child and dependent care).

 

Answer the questions, like who you paid money to and how many children were involved.

 

As for your questions, you can apply a maximum of $5,000 to a dependent care FSA (Flexible Spending Account) that your employer set up. Anything more than that will be included as income because there is no way to make it exempt from being taxed. That explains the $5,361.90 that is included as Wages in box 1.

 

The purpose of the Child and Dependent Care interview is to document how you spent the money from the FSA (otherwise, it would be disallowed as tax exempt). You will not receive any additional tax benefit over and above the $5,000 that is not taxable.

 

Don't make additional entries about the Dependent Care Benefits; just answer the questions in that interview, and it will be taken care of.

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