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I have a 5,000 childcare FSA, but spent ~11,000. Why can't i claim that extra 6,000 for the Dependent Care Credit?

Forum|Forum|6 years ago
June 1, 2019
3 replies
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This is the explanation that I don't understand:
Even though you had $10,904 in care expenses, your situation allows you to claim only up to the $5,000 that you contributed to your employer's dependent care plan for this credit. Since your $10,904 of care expenses is more than this limit, your credit amount is $0.

Shouldn't I be able to claim all expenses?

TurboTax Free Edition Online

Best answer by ChristinaS

You cannot max out an FSA and then get an additional credit. If you have 1 qualifying child, you have gotten the most benefit that is possible with a $5000 pre-tax FSA. Keep in mind that having an FSA for $5000 is usually better than having a credit based on $3000 in expenses. That $5000 in deferred income never touches your tax return.

The reason you have to enter your expenses into your return is because you need to verify with the IRS that your FSA account was used for actual qualifying expenses. Entering more than the FSA isn't going to do anything for you.

The Dependent Care Credit is limited to $3000 in expenses per child. If you have an FSA, your limit is actually raised to $5000 for one or more children. You could only get an extra credit on your tax return if your FSA was under $3000. If you had 2 children, and your FSA was $5000, you can get a credit for that extra $1000.

But, under no circumstances can you max out an FSA and get a credit on your return for one child. That is simply the law.

C

ChristinaSAnswer

Employee

You cannot max out an FSA and then get an additional credit. If you have 1 qualifying child, you have gotten the most benefit that is possible with a $5000 pre-tax FSA. Keep in mind that having an FSA for $5000 is usually better than having a credit based on $3000 in expenses. That $5000 in deferred income never touches your tax return.

The reason you have to enter your expenses into your return is because you need to verify with the IRS that your FSA account was used for actual qualifying expenses. Entering more than the FSA isn't going to do anything for you.

The Dependent Care Credit is limited to $3000 in expenses per child. If you have an FSA, your limit is actually raised to $5000 for one or more children. You could only get an extra credit on your tax return if your FSA was under $3000. If you had 2 children, and your FSA was $5000, you can get a credit for that extra $1000.

But, under no circumstances can you max out an FSA and get a credit on your return for one child. That is simply the law.

K

kkunkle

I've seen conflicting information on here about the FSA limit of $5,000. It was my understanding that I could contribute up to $5000 regardless of how many children I have. However, I've read (in the TurboTax forums) that you must pay taxes on anything over $3000 that you put in your FSA if you only have one child. Can you direct me towards IRS documentation stating otherwise? Thanks!

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yamchito

After looking for days I came up to this thread and your explanation is really awesome. It's been some months already but I need to ask this... My FSA is listed in my W2 box 14, as 'FSD 5000'...

It should be in box 10 if I understood well, then I should tell my employer to correct it and put it in box 10?

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KarenM90

Yes. Amounts that appear in box 14 are for informational purposes only.

If your FSA (Flexible Spending Account) was used for Dependent Care Benefits with pre-tax dollars, the amount used should appear in box 10 of your W2.

Contact your employer for clarification.

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Hal_Al

Employee

If you are unable to get your employer to correct it and you're SURE that amount is qualified Dependent Care Benefits, then enter it in box 10, instead of box 14, at the W-2 screen to get TurboTax to handle it correctly. Lying to TurboTax to get it to do what you want does not constitute lying to the IRS.

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ilduegno

Can we can an update to this advice now for the year 2021? I think congress has increased the limit for the dependent care FSA to $10,500. I am trying to determine whether I should increase the limit to the maximum level for this year, and whether that would benefit me given the also increased child tax credit for this year.

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nvarjas

ilduegno, I have the same question. Have you been able to find the answer?

Critter-3

Talk to your employer for the information on the FSA limitations and the ability to change the amount and when it can be done.

https://www.irs.gov/newsroom/irs-issues-guidance-on-taxability-of-dependent-care-assistance-programs-for-2021-2022

DEPENDENT CARE FLEXIBLE SPENDING ACCOUNT

Regardless of which health plan you choose, you can elect a Dependent Care FSA. This account can be used for dependent child expenses up to the age of 13. Once your child reaches age 13, they are no longer eligible. This account is used to reimburse you for dependent care expenses, such as child day care, elder care, etc. The contribution limits for 2022 are: