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Does anyone know if there are any advantages to signing up for a Dependent care spending account through work? Are you able to claim back your daycare costs from here? Where can I find such info?

asked 13 Nov '09, 20:34

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Prea
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edited 13 Nov '09, 22:23

Chris%20W.%20Rea's gravatar image

Chris W. Rea
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At my job (Arizona, United States), a Dependant Care Spending Account (DCSA) is not subject to normal income taxes. In essence, money is taken from your paycheck and not taxed as it would be normally; the downside is that you must then spend that money on dependant care such as daycare costs.

As far as getting information, the best person to ask would be someone in your company's Human Resources department.

link

answered 13 Nov '09, 20:54

Matthew%20Jones's gravatar image

Matthew Jones
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edited 13 Nov '09, 21:00

+1 great advice.

(13 Nov '09, 22:36) Chris W. Rea

Matthew Jones is correct; you'll essentially save the amount you'd have paid in income tax on the gross earnings, and it is especially important to get information about your own company's plan.

My specific additional advice:

Be careful: Your tax savings – and then some – could be wasted if you don't make sufficient claims from your DCSA and it is a "use-it-or-lose-it" plan. Know what your plan's limitations are and run your numbers to see if it makes sense before you enroll. Some companies even offer online tools to help you decide. (I know because my day job sometimes involves building exactly those kinds of tools.)

You'll find some additional information on DCSA's at the following links:

link

answered 13 Nov '09, 22:18

Chris%20W.%20Rea's gravatar image

Chris W. Rea
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accept rate: 34%

1

p.s. This is a great question to also post somewhere else. wink wink, nudge nudge, say no more

(13 Nov '09, 22:25) Chris W. Rea

Your money is put into the DCSA account tax free, and when you request a refund you don't pay any taxes. In my case ($5000 yearly max) I end up saving a couple hundred on the taxes I would have paid had I just taken the money in my paycheck.

The key, and this is critical, is that you know for 100% certainty that you will be spending all the money you put into it. The scam in my opinion is that they don't give you any money back if you don't have a qualifying expense. (I mean, where does it go? Who keeps it? Why not just take the taxes out and return to me the cash?!)

link

answered 13 Nov '09, 22:18

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MrChrister
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+1 for your second point especially.

(13 Nov '09, 22:37) Chris W. Rea
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Asked: 13 Nov '09, 20:34

Seen: 2,248 times

Last updated: 13 Nov '09, 22:23