Tax Breaks for Dependent-Care Expenses

For most couples, using money from a flexible spending account offers a bigger tax break than the child-care credit.

Girl at Preschool
(Image credit: Getty Images/Fuse)

My husband and I both work and have more than $20,000 in annual day-care expenses for our two children. We have dependent-care flexible-spending accounts at work and contribute $5,000 between the two of us. Can we also claim the child-care tax credit for our additional expenses? If not, is it better to use the money from the dependent-care FSAs or to take the child-care credit?

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Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.