Form 2441, Part III

[atrambev]

Both my wife and I contributed to dependent care accounts in 2025. I contributed $5,000 and my wife contributed $2,000. As a result, my W-2 form, box 10 reports $5,000 and my wife's W-2 box 10 reports $2,000. Our total 2025 dependent care expenses are $8,500. 

It appears Form 2441, Part III, line 19 picks up incorrect earned income from my wife's W-2. As a result, the $2,000 is treated as taxable benefit and is reported on Form 1040, page 1, line 1e.

Any idea why?

[LaShaunA3]

The IRS limits the exclusion for dependent care benefits to $5,000 per joint return, not per spouse. The maximum allowed exclusion for Married Filing Jointly is $5,000. 

When total dependent care benefits go over $5,000, Form 2441 automatically treats the extra money as taxable income. This is often done to the spouse with the smaller dependent care benefits, or lower earned income.  In this case, the $2,000 from your wife. 

This rule applies regardless of the actual amount paid for child care expenses. 

The taxable amount flows to Form 1040 Schedule 1, Line 1e.

You can find more information about ‌dependent care benefits in IRS instructions for Form 2441, Part III (Dependent Care Benefits). 

[Edited 1/26/26 | 7:48 am PST]