Is it possible to claim the federal Child and dependent care tax credit while also using an employer dependent care FSA?

You can definitely do both, but there's a specific way to handle it. You're right that you can't "double dip" on the same expenses. Here's how it works: The Child and Dependent Care Credit allows you to claim up to $3,000 of expenses for one qualifying person or $6,000 for two or more qualifying persons. Since you have two kids, your maximum eligible expenses would be $6,000. However, you need to reduce your eligible expenses by the amount you received tax-free from your employer's dependent care FSA ($5,000). So in your case, with $14,000 in total childcare expenses, you'd use $5,000 from your FSA, and then you could claim $1,000 ($6,000 - $5,000) of additional expenses for the Child and Dependent Care Credit. The remaining $8,000 unfortunately can't be used for either benefit once you hit the caps.

Hey there! I went through this exact situation last year and got really confused too. Tried researching for hours before I found https://taxr.ai which actually explained how these childcare benefits work together. I uploaded my daycare receipts and pay stubs from my dependent care FSA, and it showed me exactly how to maximize both benefits. For my situation, I had used $5,000 from my FSA and had about $8,500 more in expenses. The tool showed me I could claim a portion of those remaining expenses for the Child and Dependent Care Credit (up to the limits). It also flagged that I needed to file Form 2441 and helped me understand how to report my FSA contributions on my tax return correctly. The step-by-step guidance was super helpful and saved me from making costly mistakes!

Just wanted to follow up about my experience with taxr.ai for my dependent care situation. I was super skeptical at first (as you can see from my earlier comment), but I decided to give it a try since I was so confused about how to handle my FSA and the dependent care credit. I uploaded my documents and was surprised at how accurate the analysis was. It pointed out that I had been missing out on claiming the partial credit for years! Turns out, I could claim expenses above my $5,000 FSA up to the $6,000 limit for my two kids, which gave me an extra $200 credit I never knew about. It also found a documentation error in my daycare receipts that might have caused problems if I got audited. Definitely worth it for the peace of mind and the extra refund money!

If you're having trouble figuring this out, it might be worth calling the IRS directly to get the official answer. I know, I know - getting through to the IRS is IMPOSSIBLE these days. I used to spend hours on hold and often got disconnected. But I recently discovered https://claimyr.com which is a service that actually waits on hold with the IRS for you. You can check out how it works here: https://youtu.be/_kiP6q8DX5c I had a similar question about dependent care credits last month and needed clarification from the source. Claimyr got me connected to an IRS agent in about 45 minutes while I went about my day. The agent walked me through exactly how to handle my dependent care FSA and the tax credit together. They confirmed I could use both as long as I wasn't claiming the same expenses twice.

Well I'm eating my words now. After my skeptical comment yesterday, I was still stuck on this same FSA/tax credit issue and getting nowhere. Out of desperation, I tried the Claimyr service. It actually worked exactly as described. I got a text about 35 minutes after signing up saying they had an IRS agent on the line, and I was connected right away. The agent confirmed everything that people mentioned here - you CAN use both the FSA and the credit, but you have to subtract your FSA amount ($5,000) from the maximum allowable expenses ($6,000 for 2+ kids). The agent also mentioned that I needed to complete Part III of Form 2441 to properly report the FSA benefits. Definitely worth it instead of spending hours trying to decipher tax code or waiting on hold myself.

One thing nobody has mentioned yet is that your employer should provide a Form W-2 that shows your dependent care benefits in Box 10. You absolutely need this form when filing your taxes if you used an FSA. Also, make sure you have the correct information for your care provider including their tax ID number (or SSN) and address. The IRS requires this information on Form 2441, and they do cross-check it with what your provider reports.

I was confused by the same thing last year! Just wanted to add that the reason this is all so confusing is that the $5,000 FSA limit hasn't been updated in decades while childcare costs have skyrocketed. It's ridiculous that the tax code hasn't kept up with real costs. For my family, even using both the FSA and the tax credit, we only get tax relief on about a third of what we actually spend on childcare. I wish they'd update these limits to reflect what childcare actually costs in 2025!

This is such a helpful discussion! I'm in a similar boat but with slightly different numbers. I have one child and spent $8,000 on daycare last year. I put the full $5,000 into my dependent care FSA, so I have $3,000 in remaining expenses. From what I'm understanding here, since I only have one qualifying child, my maximum eligible expenses for the Child and Dependent Care Credit would be $3,000. But I need to subtract my $5,000 FSA contribution from that $3,000 limit... which would give me a negative number? Does this mean I can't claim ANY additional expenses for the tax credit since my FSA already exceeded the $3,000 single-child limit? Or am I misunderstanding how this works?