FSA Versus the Child Care Tax Credit
A Dependent Care Flexible Spending Account (FSA) generates additional tax savings for your childcare, and daycare expenses - often $1,030 or more annually. Looking to maximize your refund with the Federal Child Care Tax Credit, or Child Care Tax Deductions? Rather than claiming your expenses on IRS Form 1040, consider pre-taxing your 2009 or 2010 income instead.
Get out your calculator, or power up your spreadsheet and begin working through four key dependent care flexible spending account factors:
1. Childcare expenses eligible for tax deductions
2. The number of eligible children
3. The 6 ways an FSA cuts taxes
4. Your federal income tax bracket and your adjusted gross income (AGI).
FSA or Child Care Credit - 4 Factors
1- Eligible Child Care Expenses Many parents miss out on considerable tax savings by failing to claim all their eligible child care expenses. Day care and preschool costs obviously qualify. Don't forget about these extra expenses, and important rules. |
2 - Number of Children in Childcare The number of children in child care determines the amount you can claim in expenses on your taxes. The limit for the child care tax credit differs from the dependent care flexible spending account (FSA). Make sure you apply the rules correctly to maximize your deductions.
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3 - FSA Saves 6 Ways A Flexible Spending Account can save you Federal Income, Payroll, and State Income taxes. There may also be hidden tax savings on Alternative Minimum Tax, Child Tax Credit, and Education Tax Credits |
4 - Your Federal Bracket & AGI Your Federal Income Tax Bracket and Adjusted Gross Income (AGI) are important figures to know when determining how to maximize your child care tax deductions. See how these come into play. |
