Childcare FSA

[kork13]

I'm trying to decide if/what to do about a new Childcare FSA opportunity that was opened up to military folks like myself ... Open enrollment period just opened, I think it goes through Dec. I'm trying to decide if to bother with it, how much to add, and figure out how it works.

We have 3 kids -- DS8, DS6, and DD2. We use an incredibly cheap ($2/hr) daycare provider for DD2, who we love. Costs us maybe $300/mo (tops). We occasionally do stuff for the boys that I think would also qualify for the FSA (a couple weeks of day camp, & eventually before/after school care, once they eventually move out here to Japan with me next fall).

I don't understand how using the FSA would impact taxes (I know that FSA money is not taxed), like the child tax credit or childcare tax deduction. I assume I can't claim childcare expenses for both FSA and the tax deduction, but the deduction seems way easier to use...

I also don't understand how I actually use the FSA money. Do I have to use a specific payment method (they give me checks to fill out), is it a cost reimbursement thing where I have to submit receipts, or some sort of electronic payment requirement?

My biggest fear, of course, would be to forfeit unused FSA money (which is insane, BTW) ... I could put in probably up to ~$2500 pretty safely, but I really have no idea.

[disneysteve]

I think when you get into more complex tax issues like that, those are questions best answered by your accountant. They can run the numbers and see which route is more advantageous, the credit or the deduction.

Generally speaking, credits are better, but every situation is different. Being able to pay for childcare with pre-tax dollars is great, but not if the tax credit would actually save you more money.

As for how to use the FSA funds, your benefits department should be able to explain that. For my HSA, I have a debit card. The FSA may work the same way.

And yes, the whole "use it or lose it" thing is nuts. You can set money aside but if you don't use it all, we're taking it away. I don't know who decided that was okay.

[Jluke]

From what I vaguely remember, and I am never good with the tax guidelines, but I thought childcare deductions or whatever they are referred to as could be taken if both parents worked full time thus requiring childcare.

maybe there is some detail I am missing or not understanding on how the deduction / credit can be used versus the FSA.

sorry if this wasn’t helpful or accurate.

[kork13]

From what I vaguely remember, and I am never good with the tax guidelines, but I thought childcare deductions or whatever they are referred to as could be taken if both parents worked full time thus requiring childcare.

maybe there is some detail I am missing or not understanding on how the deduction / credit can be used versus the FSA.

sorry if this wasn’t helpful or accurate.

I believe there is a caveat of that nature, at least for the tax deduction, but my wife is a full-time student, which also qualifies, so not a factor.

[Like2Plan]

... I assume I can't claim childcare expenses for both FSA and the tax deduction, but the deduction seems way easier to use...

I also don't understand how I actually use the FSA money. Do I have to use a specific payment method (they give me checks to fill out), is it a cost reimbursement thing where I have to submit receipts, or some sort of electronic payment requirement?

My biggest fear, of course, would be to forfeit unused FSA money (which is insane, BTW) ... I could put in probably up to ~$2500 pretty safely, but I really have no idea.

It is true that you can not claim for both using the same expense. But, the FSA $$ is a 100% deduction (It also reduces you Social Security and Medicare taxes) whereas the tax credit is a percentage.

Here is a convenient calculator to compare the two: https://www.fsafeds.com/public/pdf/F...20FINAL-es.pdf

You can pay for the expense and file a claim.

I don't know if this form pertains to you, but this is a FSAFEDS claim form:

https://www.fsafeds.com/public/pdf/FSAFEDS-DCFSA-Claim-Form.pdf?h=nxhjspkwdttc5a3nf69a8uss1nk7zi79kxmkzr3d6j38qt8f5dko

[LivingAlmostLarge]

take the fsa