Hi all. Please forgive me for being absolutely clueless about taxes, and if this has been answered previously.
So my husband and I made $155,681 for our federal adjusted gross income for 2024 and $143,618 for our taxable income. My husband received a promotion in October 2025 and will have worked more overtime in 2025, but not a largely significant amount.
With that being said, my employer offers the Dependent Care FSA. Our baby will be entering daycare around April 2026, and we will likely spend around $11,000 in daycare for 2026.
With the Dependent Care FSA amount being raised to $7,500, does it make sense for us to take advantage of that or wait for the child and dependent care credit?
Again, I apologize for being clueless on this, but please let me know if other information is needed. Thank you all!
Dependent Care FSA vs. Child Dependent Care Credit
byu/AdventurousWind7919 intax
Posted by AdventurousWind7919
3 Comments
DCFSA is almost always preferable, but definitely when you only have one kid – your allowable expenses for the dependent care credit are only $3k with a single child, and then your actual credit is a percentage of that. You’re right on the bubble of 20% or 35%, so *at most* your tax savings using the credit is $1,050.
With the DCFSA, your allowable expenses are more than double, and number of kids is irrelevant. Your savings is FICA + marginal federal rate + state marginal rate (if relevant and not in a couple of states that don’t exempt DCFSA) on that allowable expense amount. Since you are likely in the 22% tax bracket, your federal tax savings alone would be $2200. And this holds even if you get yourself down to the 12% bracket, you’ll still be saving almost $1500 federally vs the $1050 with the credit.
For you, the FSA is the better option.
dependent care fsa can reduce taxable income. credit gives refund. compare both.