Dependent care FSAs and the childcare tax credit

The tax code has two main ways to lower the cost of childcare you pay for so you can work. You can't use both on the same dollars, so it helps to know how they compare.

Dependent care FSA

• Offered through some employers
• You set aside pre-tax money from your paycheck for childcare
• There is a yearly limit set by law; ask HR for this year's amount
• A birth is usually a qualifying event that lets you enroll or change your amount mid-year
• Money you don't use by the deadline can be lost, so estimate carefully

Child and dependent care credit

• Claimed on your federal tax return
• Covers a percentage of qualifying childcare costs, up to a limit
• Expenses paid with FSA money can't also count for the credit

Which is better?

It depends on your income and tax bracket. Many families compare both with tax software or a tax preparer. The IRS website has current limits and rules.

General information, not tax advice. Limits and rules change; check IRS.gov or a tax professional. Family Penny Saver isn't paid by any brand, store or insurer.