Day Care Deduction

Day Care Deduction

Hello Rookies!

To help alleviate some of the financial burden that children may have on your finances there are two great options available for those that need to leave the kids somewhere during the day:

1) Flexible Spending Account (FSA) dependent care deductions

This must be provided by your employer to be eligible for it.  For those lucky enough to have this benefit up to $5,000 a year can be set aside pre-tax (not a dollar of that $5,000 goes to the federal, state, or even medicare/social security office).   Having this write off could save you potentially over one thousand dollars on taxes.  Essentially this lowers the financial cost of daycare and children.  This deduction can also extend to nannies or babysitters and possibly even preschool.

2) Federal Child Care Credit

If you are not working for someone that provides an FSA dependent care deduction or chose not to enroll then you can deduct as much as $3,000.00 in tax credit for one child and $6,000.00 for two or more children at the end of the year.

Income limits on this deduction
Singles making more than $75,000 have a reduced amount they can deduct

Married joint file couples making more than $110,000 have a reduced amount they can deduct

To be eligible for either of the two scenarios above you must meet this criteria:

1 - the children must be 12 years or younger

2- the parents must both be working or in school 

Diapers and toys cost enough - make sure you utilize these cost saving benefits !


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