Dependent Care Account versus irs pub 503

[am...@paxemail.com]

I am a full time student and my husband works. We put our
child in daycare on the days I am at school. At the end of
the year the tax preparer that does our taxes asks us how
much we spend on daycare expenses. I noticed my husband can
sign up for a dependent care account where those dollars can
be taken out pre-tax. Can someone explain what the
difference between the two is? Is one way more advantageous
than the other? I would imagine you can only use one or the
other?

Thanks
Amy

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[Herb Smith]

am...@paxemail.com wrote:

> I am a full time student and my husband works. We put our
> child in daycare on the days I am at school. At the end of
> the year the tax preparer that does our taxes asks us how
> much we spend on daycare expenses. I noticed my husband can
> sign up for a dependent care account where those dollars can
> be taken out pre-tax. Can someone explain what the
> difference between the two is? Is one way more advantageous
> than the other? I would imagine you can only use one or the
> other?

Actually, the two (tax deduction vs tax credit) are not
necessarily mutually exclusive. It all depends on your
financial situation, the amount deferred through the
dependent care account, and your qualifying expenses. Perhaps
your tax preparer can run some "what if" calculations for you,
so that you can assess each scenario.