Dependent Care Tax Credit v. Flexible Spending Account

Anyone know the diffrernce in benefits between contributing to Flexible Spending Account for child care vs. taking a credit on your tax return? Just trying to figure out if its worth signing up for FSA in the new year. TIA.

Re: Dependent Care Tax Credit v. Flexible Spending Account

I use the FSA for co payments, OTC meds, etc.

My daycare costs are written off at the end of the year - I'm not sure if it's the right way to do it, but it works.

Re: Dependent Care Tax Credit v. Flexible Spending Account

The Flexible spending account is for medical expenses.

The Dependent Care account is for daycare expenses.

Both are deducted from your paycheck.

Re: Dependent Care Tax Credit v. Flexible Spending Account

Re: Dependent Care Tax Credit v. Flexible Spending Account

Re: Dependent Care Tax Credit v. Flexible Spending Account

FSA can be used for other qualifying expenses aside from dependent care. It's usually prefunded with pre-tax contributions but the rules are different for dependent care. FSA are only offered though employer plans.

The dependent care credit is claimed on your tax returns for the year in which you incur the costs.

I would suggest consulting with your accountant as to the benefits to each one.

Re: Dependent Care Tax Credit v. Flexible Spending Account

For me, I will use the medical expenses (out of pocket co-pays, vitamins, etc...) for the FSA AND use the dependent care spending account for DS' daycare.

Re: Dependent Care Tax Credit v. Flexible Spending Account

It depends on your income if you should take the credit at the end of the year or use the flexible spending.