Which is better? 1) Daycare tax credit on your tax return OR 2) daycare FSA at work. For most people, the FSA is best and saves you up to $1,033 more per year. But the true answer varies based upon factors: # of children, daycare amount, your tax bracket, W-2 amount.
A daycare FSA... The employer takes funds directly from your paycheck and places into a special daycare bank account with your name on it. The money is pre-tax which means it reduces your W-2 taxable wages saving you federal income tax, social security tax and medicare tax. There are more +/- details.
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