Have a Tax Question? Ask a Tax Expert
For the tax break in using 125 Child Care, you are allowed to consider $3,000 of your expenses for one child or $6,000 for two or more children. There is a flat limit of $5,000 for the Section 125 Plan. If you have two children, and $6,000 of expenses or more, you can elect $5,000 in the Section 125 Plan, and still claim $1,000 on your tax .
You will not receive the same amount for credit because you are not going to be claiming the total for childcare as paid BUT having the $5000 come out before you are taxed on wages will save you on income tax, SS, and Medicare.
You could save more in tax withholding under the 125 than you were getting in Childcare credit.
If my answer addressed your question please rate below or above (let me know if you have difficulty as I believe the system changed), if you need more information reply below.
Now that you have had time to view, please advise if you need more information or rating in a positive way is acceptable.
Susanna, please let me know what other information you require.