Why does Dependent Care FSA show up in box 10 on W-2?

Forum|Forum|5 years ago
February 17, 2021
2 replies
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At my work I can do an FSA for health and/or dependent care. If you don't spend it then you lose it- that's the way a FSA works. So the FSA for health is only informational on the W-2 but the FSA for dependent care is in box 10 and counts. Why is this? They are both use or lose. Say I don't spend anything from the dependent care FSA. I've lost it- it's not income for me. Why is it in box 10?

Best answer by DMarkM1

The amount in box 10 for dependent care benefits is not included in box 1 (your taxable wages). The amount is in box 10 to exclude it from box 1 and to add it to your form 2441 for the Child and Dependent Care Credit calculations.

The amount in box 10 will show as "paid" and deducted from any child care costs, up to $6000 for two or more children, you had. Any remaining costs of child care can be used for the Childcare credit.

Here is a link with more information.

DMarkM1Answer

The amount in box 10 will show as "paid" and deducted from any child care costs, up to $6000 for two or more children, you had. Any remaining costs of child care can be used for the Childcare credit.

Here is a link with more information.

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shogunn

Employee

But then why does Turbotax add the value that is entered in box 10 back to your taxable income? This has been reported by numerous users and should not be case according to your explanation.

MayaD

You need to show that you paid for qualified Child and Dependent Care benefits in 2022. You must complete Part III of Form 2441, Child and Dependent Care Expenses to figure the amount, if any, that you can exclude from your income.

To enter your child care expenses:

While signed in to your return, Select Federal from the left menu,
Go to Deductions & Credits
Scroll down to You and Your Family and select start next to Child and Dependent Care Credit.

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AmyC

Employee

To qualify for child care expenses to be deducted both parents on the tax return must have worked, been students or disabled. Once you enter w2s for both adults (since you noted no student, no disability) then you can enter the credit. For the full rules and limitations on the credit and earnings, see 26 U.S. Code § 129 - Dependent care assistance programs

@ripp67

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ripp67

You're right, thank you very much. Even though her W2 is entered, it doesn't calculate anything until a dollar amount is put into box 1. On a much related note to the "FSA/child and dep. care credit/box 10 dependent care benefits pool," putting $5000 into/toward the FSA REMOVED the $600 credit ($3000x.2) in exchange for $732 of tax relief (at 14.64% ETR), leaving us with a net $132 savings, or .0264% on that $5000 for the hassles involved with monthly claims and tax-time grief. No one ever put that info forward, the fact that you can make more on that $5000 in myriad other ways. Instead, FSAs are advertised and sold as, "Save $1000 in income taxes on as little as $5000." Complete BS. Thanks again for pointing out that a dollar amount in box 1 for both filers will likely activate the full Form 2441 within TurboTax.