How does participating in the Dependent Care account differ from using other tax credits relating to dependents?
(Back to top) Reimbursements under the dependent care account must be for employment-related expenses, and IRS regulation Section 129 Dependent Care Assistance Programs regulates what expenses may be reimbursed. Employment-related means an expense for dependent care that allows you and your spouse, if applicable, to be gainfully employed. The Dependent Tax Credit is an alternative to using a Dependent Care account and is a credit against tax liability. IRS Publication 503 Child and Dependent Care Expenses contains detailed information for determining whether a taxpayer may claim the Dependent Care Credit. For some employees, the Dependent Care Credit may be more advantageous than participating in the Dependent Care FSA, and care should be used in determining which method to select.
