Robert and Maisie have one child, Gillie (4). Both parents work full time, and their AGI in 2020 was $194,375. During the year, they paid $8,140 in childcare expenses for Gillie. Robert's employer has decided to offer a daycare flexible spending account (FSA) option for 2021. What would you recommend, and why? I

n the end, either option is a good choice because they both reduce their tax.

They can claim $5,000 on the FSA and then claim the remaining $3,140 against the Child and Dependent Care Credit.

Therefore, Robert should open the FSA. Because their marginal tax rate + FICA tax is more than the Child and Dependent Care Credit percentage they would receive, the FSA is a better option.

Robert should not open the FSA; since he would only be able to fund up to $5,000, it wouldn't cover all their expenses.