Using Your Daycare Flex Account at Work

Updated on June 28, 2011
S.L. asks from Moab, UT
10 answers

Do you take advantage of your daycare flex account at work? I just started mine and I am super nervous because it is just so final. I WAY underestimated how much we needed to put in there for the rest of the year- so I know we will use it all. It is just the whole thing with having it taken out of my paycheck and then waiting for it to come back, etc... we are already stressing about paying for two kids in daycare!

Do you use yours? Is it as easy as it sounds?

If I would have put in the max, it would have saved me almost 2k in taxes... at least by my calculation....

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answers from St. Louis on

I don't use it because I no longer have dependent care expenses. Still everyone at work who uses it keeps using it year after year so I would think they like it.

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answers from Washington DC on

when I worked - we used it and it was WONDERFUL!!!!!

We put $5K in to ours and I submitted the forms every was MY money - hubby considered it already spent - so it was my PLAY MONEY!! YAHOO!!!!


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answers from St. Louis on

I have used this for the last five years and I worked for a payroll company that provided these. They are a great savings and as long as you keep up on it, can be very easy to use. They are super flexible with dependant care because an 'qualifying event' can be changing providers. They don't have you jump through hoops to prove that either. So if you say you will use $5000 and half way though the year you need to change you can. You however have to use the care in the time you are enrolled. So don't be silly and over or under do it. But if you are paying $100 a week put that much aside and if for summer you change providers then immediately update your coverage. I have never lost money on this and the last two years my daughter has always had a preschool during the school year and summer DAY camps over the summer. At the beginning I got paid each week the amount I paid in. Lately I have allowed it to accumulate so I can get one big check. I did that and cashed out a chuck for this summer and I used it to pay for all of the summer camps, new furniture, uniforms for Kindergarten, shoes, and a small vacation. It has been very enjoyable having this splurge!


answers from Kansas City on

I almost always have at least one family using it out of my day and night shifts. But far too many people do not use it. It does concern me that if they run into financial problems after I have given them my info they could send the kids to Grandma and then falsify records as if it comes from me. Some of my parents tell me they copy the form I sign and white everything else out so they can just turn it in after that without my signature.



answers from Kansas City on

Max it if you can. We recently decided to take my daughter out of full-time daycare in the summer and send her to a different provider for one day a week, so i was nervous about being able to change our contribution amount, but when I got the paperwork to fill out, there were a ton of qualifying events listed, including changing providers, or change in work schedule, such as increased or decreased hours. So if any of those things happens, you can change your amount if you want.

As long as we turn in our receipts, I get a reimbursement check with every pay check, so if you're good about that, you shouldn't really be waiting on your money. I'm not so good with doing that, so I tend to just turn one in every few months.



answers from Chicago on

LOVE it!!!! We do the max, which i think is $5,000.



answers from Seattle on

With three kids in daycare I absolutely take advantage of our dependent care reimbursement account (DCRA) every year, even though the max deductible is peanuts compared to what I actually pay in daycare. In fact, the deduction is so low that I basically submit two daycare receipts and they reimburse me from those for the remainder of the year. Our DCRA automatically deposits into my checking account, so it's really a no-brainer. $192 withdrawn from each paycheck, $192 deposited into my account on the alternate weeks. I'm always amazed at the fact that people DON'T max out their dependent care and healthcare accounts. Every little bit helps.



answers from Kansas City on

ABSOLUTELY use the flex plan if offered. Maximum daycare deduction is $5K. The company that administers our program pays me at every pay period (providing I've sent in all my receipts), so I'm never out any money from my paycheck. That is the only thing you need to find out: what is the lag time?

You should also make use of the medical flex plan too. It is done differently from daycare inthat, you can get your money back even if you haven't contributed the full amount.

Daycare is easy to figure since you know what your costs are up-front. The medical is trickier since you don't know what emergencies lie ahead, but if you know you take monthly prescription meds, have annual doctor/gyn/pediatric appointments, figure all of that in and use it! Most plans also have an adoption component, which I used and got a $10K deduction on top of my daycare & medical.

The flex plan has made a HUGE difference in my tax picture when April 15th rolls around. It will do the same for you.



answers from Boston on

No offense but I think your calculation is wrong. You can claim up to $3,000 per child on your taxes, up to $6,000 total. If you max out your dependent care account, you net out the $5,000 that you already didn't pay taxes on out of your total $6,000 allotment so you're basically deducting an additional $1,000 when you file. The tax form exemption for 2 kids is more than the full amount that you can put in a dependent care account, so if you didn't use the account you didn't lose much.

The flexible spending account is still good to use because in addition to not paying income tax on that $5K (which would be whatever tax bracket you're in), you are also not paying the 7.65% Social Security tax, and the dependent care credit is income adjusted in favor of low earners. Very low earners can get a credit of up to 35% (of the $3,000 for one kid or $6,000 for 2) but most of us who live above poverty level can only get 20%. Even if you were in the lowest (15%) tax bracket, the FSA would save you at least 22.65%, so it's better to use the FSA and take a credit of at least 22.65% on the first $5K and then take whatever else you can get (at least 20%) on the additional $1K dependent care credit that you'd have available. That's a long way of saying that you lost out on $100-800 (depending on your tax bracket), not thousands so don't beat yourself up over it!

For anyone with one child, the FSA is better because you can take a tax break on $5K instead of $3K. For anyone who is a very low earner (as in $15K per year annual salary) the dependent care credit is better because you get a break of 35%.

Anyway...I have used it some years and not others. I'm awful about submitting the forms and usually forget to enroll, but when I have it, it's good to know that I have that money saved up and can pay for things like pre-school in big chunks.



answers from St. Louis on

I use it and I use it to the max. You have to be SURE you will use it or you will lose it. But if you look at your tax forms to see how much you pay (for sure) each year, you should be safe. It is pretty easy, you just have to know the rules. For mine I either need a receipt or a form signed by the daycare. I use mine as "bill pay" paying bills and such from the return. It's great!

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