Dependant Care Reimbursement

pay for dependent day care services with tax-free dollars. The law requires that those dependent day care expenses must be incurred to allow the employee and their spouse to work, go to school, or seek work. These expenses may include fees for a child care center or babysitter to care for an eligible dependent, or care for a disabled spouse or dependent living in the home. Pre-school, before and after school care and day camp during school vacation for children under the age of 13 would be considered an eligible dependent care expense.

Weigh Your Tax Options

Most people are allowed a minimum of a 20% tax credit on a maximum of $3,000 for one child and $6,000 for two or more children; however, this is usually less than they can claim tax-free through a flexible spending account. Employees save not only Federal taxes but social security taxes and usually state taxes. To top that, the upper limit allowed to be tax free is $5,000 for married individuals who file taxes jointly and $2,500 for married individuals filing separately regardless of how many children you have.

We encourage every employee to take a look at their own personal tax situation to determine whether the child care credit on your taxes or the dependent care reimbursement account is a better deal for them. To assist in this analysis, we have provided to simple savings worksheet for employees to use