What is the difference between the Dependent Care Reimbursement Account (DCRA) and the Dependent Care Tax Credit? Is one better than the other?
When considering funding a DCRA, you need to weigh your potential savings from the spending account versus your savings through the dependent care tax credit. The money reimbursed through a DCRA will reduce the amount of eligible expenses you can use for the tax credit on a dollar-for-dollar basis. Tax savings with a DCRA become more valuable as your income increases. Generally, if your family’s adjusted gross income is less than $39,000 a year, it’s best for you to take the tax credit rather than participate in the DCRA.
