child care deduction

I have 1 child that goes to daycare.  I had $5000 deducted from my paychecks for a flexible spending account.  Can I deduct the remainder of my costs?
    No.  For one child in daycare, the maximum daycare costs that can be used to compute the credit is $3,000.  I assume you used the flex spending dollars to pay all the daycare costs, including amounts over the $3,000 limit.  If this is the case, you are not entitled to either the credit nor any deduction for the excess costs.
    • I too have this problem, and I guess I just don't understand the answer.  I will use my real $ #'s so maybe that will help me.  I have spent $7963 on daycare in 2011.  I have a flex spending account at work that I took $5000 for.  I obviously used all $5000, plus $2963 beyond that.  The $2963 is less than the $3000, so why don't I qualify for a credit for that?  On the page that it says I don't qualify, it says I should check into my workplace to see if they have a flexible spending account so that I can have a better outcome for 2012????
    It is not the FSA that is capped, it is the amount you can claim as child care expenses for one child.  Let's say you have one child and you pay $7,000 for care expenses.  You have $5,000 deducted from your gross pay and included in Box 10 of your Form W-2 as FSA for dependent care.  You are not entitled to the Child and Dependent Care Credit because, even though you net paid out $2,000 for such care, you can only include the first $3,000 in the calculation.  Since the $5,000 you received is more than the $3,000 you are allowed to use, your net costs for the credit is -$2,000 and no credit is available.
    • right.... i totally understand that i'm not eligible for the credit.  Still, TT added $2000 to my taxable income because i had only one child with expenses.  I'm trying to figure out why that happened...
    You need to enter zero inthe question about forfeited benefits inthe W-2 interview
    • Thanks for the responses.  Sorry for the long (and repetitive) posts, but it still seems like something is odd... I went through my w2 interview again and it showed a forfeited amount of 0.  Still though, when i go to the child and dependent care section (it tells me to do this in the w2 interview even) it is still showing the text below at the end:


      Unfortunately, we can't get you this credit for 2011. Here's a breakdown of your results:
      Eligible dependent care expenses $5,000
      Dependent care benefits from your W-2 or business schedules -$5,000
      Expenses eligible for credit $0
      Credit percentage Explain This 0%
      Credit you will receive $0
      Dependent care benefits you must pay taxes on $2,000
      Your dependent care benefit is more than the amount of your allowed expenses. That means at least part of your benefit is taxable.

      We've included $2,000 of your benefit in your taxable income.

      These results could change if you make any adjustments to your return, such as adding income or deductions.


      So, again, i totally understand not being eligible for the credit.  However, that section at the bottom that states I must pay taxes on $2000 is the part that doesn't seem right to me.  I don't see where TT is tracking this (other than possibly on this page), how i can change it, or why this is happening.

      Anita, i'm not sure if you're from TurboTax or thats just what you chose as your nickname, but is this something i should get in touch with them for?

      thanks again everyone......
    When you enter your expenses, you need to enter the full amount paid, including what was paid with the fsa account.  If you enter less than the FSA account amount, than the balance becomes taxable income to you.
    • right... the problem that i'm having is that i spent more than my fsa and its still trying to add extra to my taxable income.

      My expenses were somewhere around $9700 and I had $500 taken out from my FSA.
    The amount in Box 10 of your W-2 should be $500 and you should say zero was forfeited.  Then, when you enter daycare expenses, you enter the full $9700.  Also you would answer no to the quesiton of daycare being provided by your employer unless the daycare was actually provided at the employer's site
    • Thanks everyone.  One of the TurboTax "Tax Experts" was able to help me figure out what was going on and I now know what happened. Here is a link to the details regarding the dependent care account that lay out this situation:

      "However, the exclusion cannot be more than the smaller of the earned income of either the employee or employee's spouse. Special rules apply to determine the earned income of a spouse who is either a student or not able to care for himself or herself. For more information on the earned income limit, see Publication 503."

      Apparently, this was being affected by the fact that my wife is a full time student.  Because of this, she is treated as having earned income of $250 per month ($3000 for the year).  There is special language in the provisions for the dependent care account that limit the amount that can be set aside tax-free to the lesser of both spouses earned income.  So, the amount in excess of her 'earned-income', $2000, is being added back to my taxable income accurately.

      Thanks for helping me look into this......
    des183 -- You don't get to use the entire $7,963 before applying the $5,000 of FSA.  You only get to use the maximum allowable cost of $3,000 (for one child) or $6,000 (for more than one child).  So your allowable $3,000 is offset by the first $3,000 of the $5,000 FSA which means you have no allowable child care costs with which to compute the credit.  In fact, you have $2,000 of income to claim.
    • Howard - where can I find the documentation stating that the FSA contributions are capped at $3000 per child?  I noticed turbotax adding the additional $2000 because i'm in a similar situation.  I didn't notice it adding the additional taxable income last year and i can find nowhere that states that the FSA has any limit per child, only the total limit of $5000 per family.  It seems like the $3000 limit used for calculating the credit is being applied to the FSA but i was pretty certain they had different rules.

      any help is greatly appreciated....
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