Can I use both the Dependent Care Spending Account & the Child Care Tax Credit?

Question

I am a single parent, income around $43,000/year and I have 2 young children who are both in daycare. I pay about $15,000/year in daycare expenses. I live in the state of Michigan. I participate in the Dependent Care Spending Account through work, in which I elected the maximum yearly amount of $5000. Can I claim the remaining $10,000 (capped at $6,000?) on my taxes for credit?

Answer 1

You can't use the same dollar expenditures for both, but yes, you could use the dependent care spending account for the $5000 and take the dependent care credit for $6000 of the remaining costs.

Answer 2

Yes, you can claim the remaining dependent care expense.  But your question stated "Child care tax credit" - if you meant "child tax credit" then if your children are under the age of 16, then you may receive $1,000 per child and also claim the dependent care expense.  Look at lines 47 and 52 on your 2007 1040.

Answer 3

If you receive $5,000 in dependent care benefits that you use toward your $15,000 child care expenses, then you cannot use the maximum of $6,000 of child care expenses for the child care credit.

The amount that you can use for the child care credit is the maximum of $6,000 less your dependent care benefits, or $1,000.  The remaining $9,000 of expenses you paid result in no tax benefit.

This is all figured on Form 2441, Part III.

Answer 4

Talk to an accountant who specializes in taxes. You should be able to claim daycare.