Dependent care credit vs dependent flex

[mountaintown]

This year the dependent tax credit is seeing substantial enhancements. Now it’s up to 50 % of expenses up to 8000 in a refundable credit. Since it’s now 50% vs 20% ... I’m wondering if it makes more sense to to claim the credit vs the dependent flex care account which is now increased to 10,000 I think.

We have already used about 4000 of dependent flex money this year and that will be it. We will end up with about 14000 in childcare expenses. So we could still max out the dependent flex account with the new open season or... should we take the approximate 5000 credit instead?

Our AGI is about 107,000 mfj so we should qualify. Benefits are so great this year I’m considering getting a nanny for our twins instead of daycare since I’m leaving at least 3000 credit on the table.

Summary question: is it now more tax efficient to take the tax credit vs dependent flex account?

[gocurrycracker]

Yes - this was discussed a bit in the comments of this post
https://www.gocurrycracker.com/american-rescue-plan-act-of-2021/

The tax you would save on a 10k deduction is about $1,200

1.2k < 5k

[mountaintown]

Thanks! I am also wondering if anyone has dug in enough to understand the flex account changes. I guess I'm assuming that we can still use both? For example....am I able to max out the $10,000 amount and then also get the $8000 credit?

I suppose for this to work the total daycare expenses would have to be roughly $26,000. We are considering switching to a full time nanny so I'm curious if there would be significant tax benefits and I have a small window to change/up my FSA benefits.

[gocurrycracker]

I haven't looked at the flex account changes at all, sorry