If your employer offers a dependent care flexible spending account (FSA), it could save you a considerable amount of income tax. A dependent care FSA allows you to deposit money from your pay into an account that you can then access to pay for qualified expenses for your children up to age 13 or certain adult dependents. The money goes in on a pre-tax basis having the benefit of lowering your taxable income. A dependent care FSA can be a great tax planning tool. You may need to complete paperwork to get reimbursed for expenses you pay out of pocket. More and more accounts are linked to a debit card that you can use to pay expenses directly. Beware though: Dependent care FSAs are “use it or lose it” accounts. That means if you don't use all the money you deposit in the account by the deadline, you lose the money. Also, if you use a dependent care FSA, you can only deduct on your income tax return dependent care expenses above and beyond those that you are reimbursed for through the FSA. For more information on dependent care expenses and FSA deadlines, read IRS Publication 503. If you have questions about whether an FSA is right for you, seek tax advice and planning help from a qualified professional.
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|Sheri Ann Richerson|