The higher your income, the better the FSA looks. Thinkstock By Kimberly Lankford, Contributing Editor October 11, 2016 QIt's open enrollment for my 2017 employee benefits, and my employer is offering a dependent-care flexible-spending account. Would I get a bigger break for my toddlers' day-care costs with the FSA or by taking the child-care credit on my income tax return?AYou'll generally get a bigger break with the FSA, especially as your income rises. You can set aside up to $5,000 pretax in a dependent-care FSA, if one is offered by your employer. That money avoids not only federal income taxes but also the 7.65% Social Security and Medicare tax, and it may bypass state income taxes as well. If you're in the 25% federal income tax bracket and pay 5% in state taxes, for example, contributing $5,000 to an FSA would save you $1,883 in taxes. The higher your tax bracket, the bigger the benefit. (The maximum contribution is $5,000 per household each year even if both spouses have access to a dependent-care FSA where they work.) SEE ALSO: Most-Overlooked Tax Breaks for New Parents The dependent-care tax credit, on the other hand, is worth 20% to 35% of up to $3,000 in eligible child-care expenses if you have one child, or up to $6,000 if you have two or more children. The percentage is based on your income; you'll qualify for the 35% credit only if your income is $15,000 or lower. If your income is $43,000 or more, the credit is worth 20% of eligible child-care expenses, with a maximum credit of $600 if you have one child or $1,200 if you have two or more children. See IRS Publication 503, Child and Dependent Care Expenses, for a list of credits at each income level. Advertisement You can't double dip, so you can't use the FSA and take the full dependent-care credit. But families with two or more eligible kids can max out the $5,000 FSA benefit and still take the dependent-care credit for up to $1,000 in eligible child-care expenses, which could cut your tax bill by an extra $200 or more, depending on your income. Both the dependent-care FSA and the tax credit have the same eligibility requirements: The care must be for a child under age 13 while you and your spouse work (both spouses must have earned income, or one can be a full-time student). The cost of day care, a nanny, a babysitter and preschool counts (but not the cost of school for children in kindergarten or higher grades). You can also count the cost of before-school or after-school care and day camp (but not overnight camp) during the summer and school breaks. SEE ALSO: How to Change Dependent-Care FSA Contributions Midyear Certain expenses for an elderly relative who is your dependent (such as the cost to attend an adult day-care center) may be eligible for the dependent-care FSA or tax credit, too. See Dependent-Care Flexible Spending Accounts Aren't Just for Kids' Expenses for more information about those rules. Got a question? Ask Kim at firstname.lastname@example.org.