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Child and Dependent Care Credit & Flexible Benefit Plans

My spouse and I both work and are eligible for the child and dependent care credit. Can I include the cost of my 5 year-old-son's private kindergarten tuition cost as a qualified expense on Form 2441, Child and Dependent Care Expenses?

The expense for kindergarten does not qualify for the child and dependent care credit because kindergarten is primarily educational in nature.

  • The part of the expense of sending your child to school that is for your child's care may qualify for the credit, if it can be separated from the expense of education.

For example, the cost of an after school care program may qualify, even though the school tuition does not qualify.

This type of plan is an agreement to voluntarily reduce your salary in return for an employer-provided fringe benefit.

  • These plans give you a choice of whether to receive cash wages or a benefit for dependent care.
  • You are receiving a tax benefit because you are not paying taxes on the money that is set aside to pay for the dependent care.

Why did I receive a Form W-2 reporting a benefit of $3,000 in Box 10 when my employer set aside $3,000 in wages for dependent care under a dependent care benefit plan?

This type of plan is an agreement to voluntarily reduce your salary in return for an employer-provided fringe benefit.

  • These plans give you a choice of whether to receive cash wages or a benefit for dependent care.
  • You are receiving a tax benefit because you are not paying taxes on the money that is set aside to pay for the dependent care.

I am thinking of having a family member babysit for my child full time in her home while I work. Who is responsible for paying taxes on the money I pay for this care? Can I claim this cost as a child care expense even though my family member is not a registered day care provider?

These payments may be qualified child care expenses if the family member babysitting is not your dependent or your child under age 19 and you otherwise qualify to claim the child and dependent care credit.

Do daycare payments for an elderly person qualify for the child and dependent care credit?

Daycare payments for an elderly person may qualify as dependent care expenses if the person receiving the care is your spouse or dependent who lives with you and is incapable of self-care.

What is a flexible spending arrangement?

A flexible spending arrangement (FSA) is a form of cafeteria plan benefit, funded by salary reduction, that reimburses employees for expenses incurred for certain qualified benefits. An FSA may be offered for dependent care assistance, adoption assistance, and medical care reimbursements. The benefits are subject to an annual maximum and are subject to an annual “use-or-lose” rule. An FSA cannot provide a cumulative benefit to the employee beyond the plan year.

Can a cafeteria plan make advance reimbursements for medical expenses?

No. Employees can only be reimbursed for allowable, documented expenses incurred during the plan year, after the expenses have been substantiated.

A town has a cafeteria plan which offers health care benefits to domestic partners. Does a domestic partner and his or her child qualify to be covered under the health plan?

Cafeteria plans can offer health insurance to employees, their spouses and their dependents. The domestic partner and dependents in this case may not be participants in a cafeteria plan because they are not employees, but the plan may provide benefits to them. For example, a domestic partner may not be given the opportunity to select or purchase benefits offered by the plan, but the domestic partner may benefit from the employee’s selection of family medical insurance coverage or of coverage under a dependent care assistance program.