Tuesday Tax Time

See that kid staring into the camera?  Her parents or guardians may be missing a year-end tax credit on their tax return.  Doesn’t that make you want to cry?  We’ll call this little girl Taxita (pretty lame, huh?).

See, if Taxita’s Mom put money in her flex spending account to pay for dependent care costs, then she would only be allowed to put in $5,000 per year.  And when she put money in her flex spending account, she did this tax free.

“But what if your dependent care costs are more than what the flex spending account allows you to spend?”, Taxita’s Mother may ask.  Good question.  Taxita needs to let her Mommy know that you have a Child Care Credit you can also take on your tax return at the end of the year to make up for what you couldn’t pay for using your flex spending account.  Make sense?

Example: Taxita’s Mommy spent $5,000 on dependent care through her flex spending account at work.  But her total costs for dependent care was $6,000.  Well, she can take a tax credit at the end of the year (subject to restrictions) for the $1,000 she couldn’t pay for using the flex spending account funds.  Of course, she can’t use this year end credit if she paid for all of the dependent care costs using the flex spending account.  Then she would be getting the tax free benefit twice.

Just make sure you (and Taxita’s Mommy) monitor this situation, and claim all the tax benefits you have coming to you.

So, get thee to the Sunshine House… and take all the tax deduction you can for it!

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that (i) any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code; (ii) any such tax advice is written in connection with the promotion or marketing of the matters addressed; and (iii) if you are not the original addressee of this communication, you should seek advice based on your particular circumstances from an independent advisor.

Tweet This (and such)

Hide Sites