A Dependent-Care FSA lets you pay up to $5,000 of eligible childcare with pre-tax income. Enter your childcare cost and tax rate to see your yearly tax savings.
Sample input: Annual eligible childcare cost ($): 12000, Marginal tax rate (fed + state + FICA, %): 30, Married filing separately? (1 = yes, 0 = no): 0
Tax saved per year: 1500 (Big tax savings)
Routing $5,000 of childcare through a Dependent-Care FSA saves about $1,500 in taxes this year (you are at the $5,000 cap). Note: dollars run through the FSA cannot also be claimed for the Child & Dependent Care Tax Credit.
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You can set aside up to $5,000 per year ($2,500 if married filing separately) for eligible care of children under 13 or other qualifying dependents, per IRS Publication 503. This limit is set by statute and is not inflation-indexed.
Generally no double-dipping. Dollars run through a Dependent-Care FSA reduce the expenses you can use for the Child and Dependent Care Tax Credit (IRS Publication 503). Many families compare the two and use whichever saves more, or split between them up to the limits.
Care that lets you (and your spouse) work or look for work — daycare, preschool, before- and after-school programs, and qualifying summer day camps for children under 13. Overnight camp and schooling from kindergarten up generally do not qualify (IRS Publication 503).
It multiplies your contribution (the lesser of your childcare cost or the annual limit) by your combined marginal rate. Because the money is pre-tax, you avoid federal income tax, most state income tax, and often FICA on those dollars.