How does the DCSA compare with the Federal Child and Dependent Care Income Tax Credit?
If you are currently incurring dependent care expenses, you are probably paying for these expenses in after-tax dollars and taking the Federal Child and Dependent Care Income Tax Credit when you file your income taxes. The IRS limits the federal income tax credit to eligible expenses of $3,000 for one dependent and $6,000 for two dependents or more. The DCSA limit is $5,000 regardless of the number of dependents; however you can claim the remaining $1,000 toward the Federal and Dependent Care Income Tax Credit. Whether you use the federal income tax credit or the Dependent Care Spending Account, you must complete and submit IRS Form 2441 with your annual income tax return. This form provides the IRS with information on your dependent care provider and your dependent care expenses for the tax year.
If you are currently incurring dependent care expenses, you are probably paying for these expenses in after-tax dollars and taking the Federal Child and Dependent Care Income Tax Credit when you file your income taxes. The IRS limits the federal income tax credit to eligible expenses of $3,000 for one dependent and $6,000 for two dependents or more. However, the DCSA limit is $5,000 regardless of the number of dependents. Whether you use the federal income tax credit or the Dependent Care Spending Account, you must complete and submit IRS Form 2441 with your annual income tax return. This form provides the IRS with information on your dependent care provider and your dependent care expenses for the tax year.
