My kid's daycare expenses R bout $6k/yr. Should I enroll N my job's DayCare Spendg acct? How's that save $$?

Question

I just dont understand how that will help me save money. Will my taxes be that much less that I break even?

Answer 1

Talk with your job's Human Resources to find out if there are any benefits.  Maybe the company provides a benefit for using that DayCare.  Also, shop around and price other Day Cares to see if you are getting the most for your money and if you can save money anywhere.  It comes down to what you are expecting to get for your money...they may provide education and other services that another place may not, for less.  So what do you want for your children and how can you get that without giving them your whole paycheck?

Answer 2

The $5000 in the dependent care benefits will be tax free. If you are in the 15% bracket, that $5000 will save you about $1100 in taxes. It won't be noticeable on your 1040 but it will be accounted for on your W2.

Here is another way to look at it: In order to take home $5000, the average person must make about $6400 to $7500 due to taxes. In a dependent care account, to get to that $5000, you only have to make $5000 as there are no taxes on that money.

If your employer offers one, they are pretty good deals.