October 19, 2010
If you anticipate having childcare expenses in 2011 (i.e. nanny or daycare), now is the time to check with your company’s HR department to see if you have access to a Flexible Spending Account (FSA). If you or your spouse have access, you’ll be able to pay for up to $5,000 of your nanny expenses with pre-tax dollars. Depending on your marginal tax rate, this will save you between $2,000 and $2,300 each year.
Check now because most companies have open enrollment in the fall and, if you miss it, you’ll have to wait until the next enrollment period.
If you miss the enrollment period, you can still take advantage of the Child or Dependent Care Tax Credit. However, for most families, the savings are much less: $600 if you have one child or $1,200 if you have two or more children.
For more info on childcare tax breaks, visit our Answers section or give us a call.