Using both Dependent care FSA and Child Care Tax Credit together in 2021/2022?

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RockOn
Posts: 33
Joined: Mon Oct 08, 2012 2:46 am

Using both Dependent care FSA and Child Care Tax Credit together in 2021/2022?

Post by RockOn »

Hello! Long time lurker, and I had questions about combining the dependent care FSA and child care tax credit as long as I avoid "double dipping."
Wondering if this is a viable strategy with the more flexible FSA rules this year and longer grace period.

My workplace allows for the full 10,500 dependent care FSA for 2021, and it gives the full expanded grace period to incur charges and be reimbursed for this FSA through 12/31/2022- meaning I can incur expenses even in 2022 through my daycare and file a claim to be reimbursed from the 2021 FSA money account.

I am going to have about $9000 expenses for childcare for 2 children in 2021, and closer to $28,000 for 2022 in childcare/daycare/after school programs that we are already enrolled in. I elected to contribute the max $10,500 dependent care FSA- we are at a high tax bracket, and I know that we will be able to get it fully reimbursed between 2021 and 2022 childcare expenditures.

My question is- if you have a full year grace period, wouldn't the best strategy be to hold off on using the 2021 dependent care FSA this year for any reimbursement on the $9000 childcare expenses in 2021, and use that completely for the child care tax credit in 2021. And then in the first 6 months of 2022, with the expanded grace period rules for FSA, submit for reimbursements for the full 2021 dependent $10,500? Even in the first 6 months of 2022, we'd be spending well over the $10,500 (probably around 14,000) in childcare expenses for our 2 kids.

Would that be viable/allowed? It definitely would not be double dipping given that all the 2021 childcare expenditures would be going to the child care tax credit, and the 2022 childcare charges would be used for the 2021 FSA. And we'd still have the 2nd half of 2022 childcare expenditures to fully utilize another dependent care FSA for 2022- regardless of whether it reverted back to 5000 or stayed the same at 10,500.

Any thoughts?
Thanks so much for reading!
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