If you use the 125 plan to have child care taken out pretax dollars....?

Question

Can you still claim that same child care as a deduction on federal taxs?

Answer 1

No.  Any expense for which you receive a tax free reimbursement (including from a health insurance company, an HSA, an MSA, a Section 125 plan, etc.) is not allowed to be deducted.

Answer 2

No, you can't claim a child care credit for the SAME dollars.  If your 125 plan is for $2000, and you pay $3000 for eligible child care expenses, you could use the additional $1000 to calculate a child care credit.

Answer 3

The general rule in taxes is you can't take a tax benefit in 2 different places with the same money.

You should rough out your tax return both ways to see which will give you the best benefit.

If you use the 125 plan you must still file form 2441 (part 2) with your return.

Answer 4

If you use at $3,000 or more dependent care benefits for one child ($6,000 for more than one), you cannot take any further deduction for child care.

In case you have a benefit less than these amounts, the difference would qualify for the dependent care deduction.

Form 2441 handles this situation.