Dependent Care Flexible Spending Accounts
If your company has a "cafeteria plan" that allows employees to designate up to $5,000 of their wages as related to child-care, we suggest you consider participating. The child care plan works as follows: You designate a portion of your wages to be deducted and held in an account on your behalf. You then submit expenses to this for reimbursement. Benefit: The amounts spent for child-care up to $5,000 are treated as nontaxable, for Federal, State and FICA purposes, which saves much more in taxes than the benefit you currently receive from the child care credit. When making the election to use the benefit, determine how much of the $5,000 to elect since unspent amounts are forfeited.