| Your employer may offer a Dependent Care Flexible | | | | you and your spouse make more than $43,000 |
| Spending Account, which will help you with taxes when | | | | annually and each of you earns more than your |
| it comes to childcare costs. There are, however, | | | | childcare costs in a year, the Dependent Care Flexible |
| exceptions and details that suggest you consider your | | | | Spending Account is the best deal for you. |
| financial situation before choosing between your | | | | For parents earning less than $43,000 a year and |
| flexible spending account or the Child Care Tax Credit, | | | | single parents, the Child Care Tax Credit might be a |
| or both. | | | | better alternative. If you use tax preparation software |
| First, you should estimate your income and childcare | | | | like Turbo Tax, just have the software calculate your |
| expenses for the year. Compare your expenditures to | | | | income taxes both ways. The result with the highest |
| the childcare credit allowances. Next, you need to | | | | refund or least amount of taxes owed is the way for |
| understand the allowances for a Dependent Care | | | | you to go. |
| Flexible Spending Account. In 2009, a couple filing jointly | | | | Just remember that the disadvantage of a Dependent |
| could contribute $5000 of pretax money to a flexible | | | | Care Flexible Spending Account is that the money is |
| spending account. Because this money is not taxable, it | | | | deducted from your paycheck and any of the money |
| lowers your total tax liability by lowering your taxable | | | | you put aside and don't use for childcare reverts to the |
| income. The Child Care Tax Credit lowers the amount | | | | government. For this reason, it is important for you to |
| of tax you have to pay, but it does not lower your | | | | calculate your childcare costs as accurately as |
| taxable income. | | | | possible. You don't want to lose money in flexible |
| Some taxpayers can use both the Child Care Tax | | | | accounts. |
| Credit and the flexible spending account, provided that | | | | If you do the math accurately, or let a software |
| they have two or more children and spend more than | | | | program do it, you will be able to determine which of |
| $5000 in childcare costs. These taxpayers can put | | | | these three options best serves your personal income |
| $5000 into a flexible spending account and qualify for | | | | tax strategy. Either way, it is important for parents to |
| $1000 in Child Care Tax credit. | | | | get all the help the federal government allows toward |
| If you do the math, you will probably discover that if | | | | childcare costs. |