Dependent Care vs. Tax Credit -- simple math?

Your effective rate might be higher if you had $5000 more in income. Remember in your calculations to add the $5000 to your W2 income when you estimate.

I do the dependent care thing, have around the same rate, and it is better to have the pre tax deduction.

Just do a dummy return where you take $6K in child care and add $5K to your income. I think you will find the FSA is better.

Play some games with some other tax forms for this purpose and time in your life and change the way that you do claim these items and then you will be able to see what the different results might be at that time in your life.

Hope that you find the above enclosed information useful. 04/03/2014

Your effective tax rate does not determine whether you take DCB at work or not. Your marginal tax rate is significant.

If your marginal tax rate is more than 20%, then it is likely that your DCB are more beneficial to you than paying out of pocket and using the tax credit.

If your marginal tax rate is less than 20%, then you really need to work your return both ways because the DCB from work are also exempt from the payroll taxes of 7.65%, so that it is possible that DCB are better for you even at low marginal tax rates.

You may also consider your state taxes, as some states give credit for childcare expenses paid by the taxpayer outside of a DCB at work.

it doesn't matter how much you spend, you are only entitled to the maximum that IRS allows and the amount if also governed by your income, the higher your income the less % you are allowed to claim