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We file MFS. I put $2500 in my dependent FSA. Can my wife put $2500 in her FSA too? Will I/we be able to claim the money as childcare credit on our taxes?

Forum|Forum|6 years ago
May 31, 2019
5 replies
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My wife and I do our taxes married filing separately (for student loan reasons). We have a daughter, and for the past two years, I have used the dependent FSA at my work, and put $2500 in it (since we are MFS). My wife just got a new job, and for the first time, also has an FSA. Can she also take $2500, or can only the parent claiming our daughter as a dependent do that? Will I (or we) be able to claim the money we put into the FSA(s) as a childcare credit on our taxes, or is this not allowed since we are not separated? I thought I understood this, but my online research has gotten me more and more confused

TurboTax PLUS Online

Best answer by AnnaB

Taxpayers using the Married Filing Separately status do not qualify for the dependent care credit.

In addition, funds put into an FSA for dependent care are already "pre-tax". This means you've already gotten a tax benefit for these amounts. Therefore, no additional credit would be allowed for the same amount. If you have expenses in excess of the FSA and use a different filing status, then you may still qualify for a dependent care credit.

In regards to putting money into both of your FSA's, the rules say taxpayers that are filing separately can put up to $2,500 into their FSA. This means that each of you can put the maximum of $2,500 into your Dependent Care FSA; however, you can only use your dependent care expenses one time when requesting reimbursement.

When you prepare your tax returns, the spouse that does not intend to claim the child should still enter them as a dependent and indicate that the other parent will claim the child. This allows the child to show up in the Dependent Care Credit section for determining if you had any excess FSA benefits that may be taxable.

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SweetieJean

Employee

Okay, why are you filing separately? It costs more taxwise than Joint..

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setcpa

In Ohio, couples making about the same amount are usually better filing MFS.

AmyC

Employee

If you have rental real estate losses, kids, low income, and more then you should carefully review whether to file MFS or MFJ. Here is a great article by Turbo Tax on MFJ vs MFS.

@setcpa

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G

gretchen-petersoAuthor

Employee

For student loan reasons. In order to qualify for IBR and keep my student loan payments as low as possible (I'm a public interest attorney), we have to file MFS. 5 more years to go, and we'll start filing MFJ.

A

AnnaBAnswer

Employee

Taxpayers using the Married Filing Separately status do not qualify for the dependent care credit.

In addition, funds put into an FSA for dependent care are already "pre-tax". This means you've already gotten a tax benefit for these amounts. Therefore, no additional credit would be allowed for the same amount. If you have expenses in excess of the FSA and use a different filing status, then you may still qualify for a dependent care credit.

In regards to putting money into both of your FSA's, the rules say taxpayers that are filing separately can put up to $2,500 into their FSA. This means that each of you can put the maximum of $2,500 into your Dependent Care FSA; however, you can only use your dependent care expenses one time when requesting reimbursement.

When you prepare your tax returns, the spouse that does not intend to claim the child should still enter them as a dependent and indicate that the other parent will claim the child. This allows the child to show up in the Dependent Care Credit section for determining if you had any excess FSA benefits that may be taxable.

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gretchen-petersoAuthor

Employee

Thank you for your helpful response. Just to clarify, do you mean both spouses can deposit in an FSA, even if only one of them is claiming the child as a dependent? It sounds like from you last paragraph that even if we can, it may not be a good idea, since there could be a tax penalty?

P

peachette19

Please let me know if you find a fix. I’m in the exact same situation.

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williasp

@peachette19 I was in full agreement with you, until I read Pub 501 reproduced below. Apparently, if you file MFS and don't claim the child as a dependent, then you can't obtain the tax benefit of using an FSA. It really doesn't make any sense, but that seems to be the situation. It totally messed up my son, who contributed to an FSA, then used the funds to pay for child care, only to find out that the FSA sum is added back to income and taxable. Of course, how are you supposed to know at the time you elect to participate in an FSA what your tax filing status will be 15 months later?

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peachette19

Hmm. The instructions to 2441 seem pretty clear that you can...

Did you ever get this situation rectified? I am in the exact same situation for 2023.

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BillM223

As note above, you cannot claim the Child and Dependent Care credit, unless you meet the special conditions under "Married Persons Filing Separately" on page 2 of the Instructions for form 2441.

You CAN, however, contribute to an FSA, if you have a dependent that qualifies you. Yes, the limit of the contribution to the FSA is $2,500 for each spouse.

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J

JustHERE1

@BillM223

The way I read it as well, is we should each be able to contribute 2500 to our FSA and use that for dependent care expenses.

The problem is on box 10 of my w2 it lists 2500. When doing the child interview my wife claims the kid and then it tells me I am not eligible. I then have to pay 600 more in taxes which equates to the tax on the 2500.

I don’t understand why TurboTax is taking that 2500 as taxable income.