Flex Plan Tax Break for Child Care Costs

You can still claim the dependent care credit to the extent your expenses are more than the amount you pay through your flexible spending account.

The maximum amount of dependent care costs you can fund through a flexible spending account (FSA) is $5,000.  But the credit applies to as much as $6,000 of expenses for filers with two or more kids under age 13.

In that case, you’d run the first $5,000 of dependent care costs through the FSA, and the next $1,000 would be eligible for the credit on Form 2441.  For most filers in this situation, taking the credit will save an extra $200 in taxes.

 

First Year Tax Break for College Grads

College graduates lucky enough to be starting a full-time position, take note:  Use part-year withholding to hike take-home pay by having less tax withheld.

The standard federal withholding tables assume you are working for the full year when figuring how much income tax to take out.  The part-year method sets withholding according to what you’ll actually earn during the portion of the year that you work.  Employees working less than 245 days in a year can ask firms to use this method.