How best to account for child care expenses in taxes?

August 19, 2013 10:05 AM

I'm putting my daughter in preschool and want to know the cheapest way to pay for it.

Assume child care costs $12,500 per year. My employer allows me to contribute up to $5,000/year to a Dependent Care Spending Account FSA. I am in the 25% tax bracket filing as a "qualifying widower". That still leaves me with approximately $7,500 in child care expenses for the year. I should be able to claim a child care tax credit for 20% of up to $3,000 of that, which is a $600 credit. Is there anything else I can do to save more money on child care than that?

I will ask my accountant about it before tax season, but he can be difficult to reach sometimes, so I'm looking for a reasonable estimate.

posted by tylerkaraszewski to Work & Money (2 answers total)

I'd definitely see your CPA about it - as I understood it, it was one or the other, not both. But my year runs Oct-Sept so it's always a mess anyway. Once I started FSA on my CPAs advice for my and my spouse's specific tax situation, I stuck with it on calendar year (I use it up by the end of July).

One thing I didn't realize is that once my eldest hits 13, no more FSA. So, more to plan for ...
posted by tilde at 10:13 AM on August 19, 2013

Whoops, looking at this, for me I guess I am doing both to an extent since I have two kids (yes, I rely completely on my CPA and just sign on the bottom line after he walks me through the worksheet, not the best idea but it works for us and that particular ... relative trust. :).

YMMV, =/=CPA
posted by tilde at 10:16 AM on August 19, 2013