Question

Is TurboTax erroneously saying we don't qualify for the federal child care credit? We put $5,000 into a dependent care FSA and had $10,000 in childcare expenses.

Forum|Forum|2 years ago
April 9, 2024
2 replies
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Based on what I've read on the IRS website, we should still qualify for the credit. But TurboTax says we don't, and there doesn't seem to be a way to correct this in TurboTax.

TurboTax Deluxe Online

B

BillM223

TurboTax is correct; it is highly unlikely that you don't qualify for the credit, so please don't go trying to fix it.

How many children were you paying for? If you had $5,000 in your FSA, then with only one child, you would not be eligible for the Child and Dependent Care Credit.

If you had two children you were paying for, then you might be eligible for a small credit. The max you can use in the credit calculation for one child is $3,000. But you can't apply this $3,000 to both the FSA and the credit, so no credit for one child.

For two (or more) children, the max you can use in the credit calculation is $6,000. Since the FSA max is $5,000, this leaves $1,000 not used for the FSA which could be applied to the credit. Hence, taxpayers in this situation often end up with small credit on that $1,000 (it's a percentage based on taxpayer income, see form 2441).

The usual situation is that the vast amount of childcare expenses bring no tax benefits, because of these limitations.

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D

Daniel 10

Of that 5k, we didn't get any benefit from the company. It was our own money or tax that went into it. I think that means we should be able to take 5k away from our total day care cost and get the credit applied to the remaining cost for child care.

DawnC

If the $5K was in Box 10 of your W-2, you already got a tax deduction for that. If you have more than one child, you can get an additional $1k deduction from the Dependent Care Credit. That thousand along with the $5K tax free w-2 amount would be $6K - which is the maximum amount of expenses that qualify for the Dependent Care Credit, with 2 qualifying children. @Daniel 10

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B

Bsch4477

If you have one child the $5,000 FSA money maxed out your child care credit so you can’t in addition claim more federal credit on your return.