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New Tax Bill and Daycare -- Question for LR Experts
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Something just came to mind with the new tax bill and daycare as a tax deduction & I'm someone here might have a little wisdom.

In 2017 we maxed out a daycare flexible spending account, which was all pre-tax money. We could have just paid fully from post-tax earnings and made up for it by claiming the deduction at year end, but at least took that $5k in maximum daycare FSA eligibility to make it easier to budget through the year, and we'll be able to claim the excess of the $5k in deductions.

However, now the standard deduction jumps up to $24k. We don't owe much on our mortgage & don't pay much interest on it, don't have many business expenses out of pocket, not really much to deduct beyond the normal things, so we won't have $24k in deductions. It got me thinking -- if we go ahead and max out the $5k pre-tax daycare FSA again this year and have the $24k standard deduction next year, won't that in effect allow us to grab a loophole and technically have both the $24k standard deduction and the additional $5k? We wouldn't "owe" those taxes back, would we?

Any ideas on this? I'm no tax guy, but if there's a loophole here, I'm taking full advantage of it. No sense in letting an extra $5k be taxed if I can avoid that.
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Re: New Tax Bill and Daycare -- Question for LR Experts [MidwestRoadie] [ In reply to ]
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Correct you would not owe anything back.

I am not a tax expert.

But that's the point of the FSA is an additional tax dodge. Just like those that make to much to get the full deduction, still get the FSA tax free.

Just Triing
Triathlete since 9:56:39 AM EST Aug 20, 2006.
Be kind English is my 2nd language. My primary language is Dave it's a unique evolution of English.
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Re: New Tax Bill and Daycare -- Question for LR Experts [DavHamm] [ In reply to ]
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Awesome. Thanks! I’m going to have to max out the $5k & keep as much as I can out of the pockets of Congress.
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Re: New Tax Bill and Daycare -- Question for LR Experts [MidwestRoadie] [ In reply to ]
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Can you explain what you currently do for your daycare pay...how do you do this? I'm intrigued
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Re: New Tax Bill and Daycare -- Question for LR Experts [littlefoot] [ In reply to ]
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littlefoot wrote:
Can you explain what you currently do for your daycare pay...how do you do this? I'm intrigued


https://www.fsafeds.com/explore/dcfsa

Just Triing
Triathlete since 9:56:39 AM EST Aug 20, 2006.
Be kind English is my 2nd language. My primary language is Dave it's a unique evolution of English.
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Re: New Tax Bill and Daycare -- Question for LR Experts [littlefoot] [ In reply to ]
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We max out a FSA for $5k pre-tax from payroll and then the remainder is paid by post-tax earnings and itemized at year end. For example, if daycare was $10k for the year, $5k through the FSA with non-taxed money, then another $5k paid but deducted on tax itemization at year end.

I don’t recall how much our itemized deductions have been, but I know with certainty that the new standard deduction of $24k will exceed what we itemized and would be itemizing in the future, particularly as our day care costs will decrease when #2 is in school later this year and we’re in position to crush our mortgage over the next few years if we choose to (jury is still out there, might just invest more heavily instead since our mortgage rate is stupidly low). Add to it the $5k we’ll still contribute to the day care FSA and it’s effectively like $29k that’s not taxed instead of the $24k standard deduction. It ends up being a pretty decent increase in non-taxed money over what we’d been itemizing plus what we had been putting in a FSA. I’ll take it.


littlefoot wrote:
Can you explain what you currently do for your daycare pay...how do you do this? I'm intrigued
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Re: New Tax Bill and Daycare -- Question for LR Experts [MidwestRoadie] [ In reply to ]
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Where are you itemizing daycare expenses at on your schedule A? We contribute the max of 5k to a fsa that is taken out pre tax, itemize in our return and have our taxes ‘professionally’ done and I don’t believe have ever been able to deduct anything above that 5k fsa pre tax and our daycare expenses are much above that.
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Re: New Tax Bill and Daycare -- Question for LR Experts [H2Owings] [ In reply to ]
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H2Owings wrote:
Where are you itemizing daycare expenses at on your schedule A? We contribute the max of 5k to a fsa that is taken out pre tax, itemize in our return and have our taxes ‘professionally’ done and I don’t believe have ever been able to deduct anything above that 5k fsa pre tax and our daycare expenses are much above that.


https://finance.zacks.com/...-deduction-4600.html

But I would suggest you talk to your 'professional'

Just Triing
Triathlete since 9:56:39 AM EST Aug 20, 2006.
Be kind English is my 2nd language. My primary language is Dave it's a unique evolution of English.
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Re: New Tax Bill and Daycare -- Question for LR Experts [DavHamm] [ In reply to ]
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That’s a child tax credit and not really an itemized deduction option, you just have to itemize to take advantage of it. And if you make more than like 30k it reall does nothing for you. With two kids we got the 6000 for it, then subtract the 5000 we took for the pre tax fsa benefits leaves you with 1,000 tax credit. Then if you make more than like 30k you only get 20% of that which took us, and most others in our shoes, down to $200 tax credit. While it is $200 in my pocket and not in the govt.’s, it isn’t really a life changing loophole.
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Re: New Tax Bill and Daycare -- Question for LR Experts [H2Owings] [ In reply to ]
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Sorry -- got off the grid as much as possible for a couple of days.

Upon reflection, you're correct. I thought that we itemized the amount over the $5k FSA contribution because we gave the records to our accountant, but he used them to see if we qualified for the credit, which we don't really qualify for much of anything with it. If I'm looking at things correctly over what we do actually itemize, the increase with the standard deduction should work in our favor pretty well. But, in all honesty, what I think would work more in my favor would be my employer taking their tax cut and using some of it to start catching up stagnant wages from the last several years (a boy can dream). Thanks for the catch and clarification. I'm obviously not a tax guy!



H2Owings wrote:
Where are you itemizing daycare expenses at on your schedule A? We contribute the max of 5k to a fsa that is taken out pre tax, itemize in our return and have our taxes ‘professionally’ done and I don’t believe have ever been able to deduct anything above that 5k fsa pre tax and our daycare expenses are much above that.
Last edited by: MidwestRoadie: Jan 16, 18 6:55
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