• filter:

Dependent care FSA question

  • Page :
  • 1
  • Text Only
  • Search this Topic »
Voting History
rated:
I'm trying to take advantage of the dependent care FSA, but I'm not sure if my situation qualify. I have a full time job, but my spouse works at home. She invests in stocks occasionally, and manages a rental property outside of the US. In that case, can she still be considered "Employed"? If yes, would her case be "Self-Employed"? If so, I'm assuming that we'd qualify to apply for dependent care FSA?

Member Summary
Staff Summary
Thanks for visiting FatWallet.com. Join for free to remove this ad.

rated:
deeptii said:   I'm trying to take advantage of the dependent care FSA, but I'm not sure if my situation qualify. I have a full time job, but my spouse works at home. She invests in stocks occasionally, and manages a rental property outside of the US. In that case, can she still be considered "Employed"? If yes, would her case be "Self-Employed"? If so, I'm assuming that we'd qualify to apply for dependent care FSA?

Is this for the care of your spouse who is either physically or mentally uncapable of self-care and lives with you? Most dependent care accounts are used for children under 13 (daycare, summer camps, etc.)

rated:
Assuming we're talking about the dependent being a young child, the requirement is the parents must pay a caregiver to allow them to work or look for work:

https://ttlc.intuit.com/questions/2950231-is-the-dependent-care-...

rated:
CorradoJr said:   
deeptii said:   I'm trying to take advantage of the dependent care FSA, but I'm not sure if my situation qualify. I have a full time job, but my spouse works at home. She invests in stocks occasionally, and manages a rental property outside of the US. In that case, can she still be considered "Employed"? If yes, would her case be "Self-Employed"? If so, I'm assuming that we'd qualify to apply for dependent care FSA?

Is this for the care of your spouse who is either physically or mentally uncapable of self-care and lives with you? Most dependent care accounts are used for children under 13 (daycare, summer camps, etc.)

  
Clearly they're using it for their child(ren).

rated:
Your spouse has to have earned income, either from a W2 or profits from a business. Rental and investing income doesn't count, unless it's through an established corporation which would allow you to treat it as business profit.

Based on what you wrote, probably not.

rated:
deeptii said:   I'm trying to take advantage of the dependent care FSA, but I'm not sure if my situation qualify. I have a full time job, but my spouse works at home. She invests in stocks occasionally, and manages a rental property outside of the US. In that case, can she still be considered "Employed"? If yes, would her case be "Self-Employed"? If so, I'm assuming that we'd qualify to apply for dependent care FSA?


Are you hiring someone to take care of your child?

What is your wife doing during that time? I don't think buying some stocks and being a long distance landlord qualifies as "employed".

rated:
My understanding of a Dependent Care FSA, both parents need not be employed to qualify, but the annual reimbursement cannot exceed the lower of your or your spouse's earned income. It also can only be used to reimburse qualified child care expenses as follows:
-Care for your child who is under age 13
-Before and after school care
-Babysitting and nanny expenses
-Daycare, nursery school, and preschool
-Summer day camp

According to this Turbotax article :
"To qualify for a Dependent Care FSA, it is not a requirement that both you and your spouse are employed (or disabled). However, reimbursements from your Dependent Care FSA cannot exceed the lower of your or your spouses (if married) earned income. This means that to make a Dependent Care FSA work, you both need to be employed (or disabled).

To qualify for the Dependent Care Credit, either both spouses need to be employed or searching for employment."

The IRS states here that Taxable earned income includes: 
-Wages, salaries, tips, and other taxable employee pay;
-Union strike benefits;
-Long-term disability benefits received prior to minimum retirement age;
-Net earnings from self-employment if: 
-You own or operate a business or a farm or
-You are a minister or member of a religious order (see Special Rules page for more information);
-You are a statutory employee and have income.

If you can legitimately qualify your spouse's activities as self-employment with earned income and be willing to defend it to the IRS, and have qualified dependent care expenses, and not have reimbursement higher than the lower of you or your spouses earned income, then you should qualify for using a Dependent Care FSA.

Also worth noting, if you don't use an FSA, you may still qualify for a Dependent Care Tax Credit if you are employed and your spouse is actively looking for employment.

rated:
i am in similar situation. I enrolled in Dependent FSA. My spouse has no income so far yet. Any idea how will this effect taxes this year?

rated:
greenearth said:   i am in similar situation. I enrolled in Dependent FSA. My spouse has no income so far yet. Any idea how will this effect taxes this year?
  
I had a similar experience: https://www.fatwallet.com/forums/finance/1432908

You'll have to pay income tax on the FSA amount, but you still come out slightly ahead because you don't have to pay the FICA tax.

rated:
doveroftke said:   greenearth said:   i am in similar situation. I enrolled in Dependent FSA. My spouse has no income so far yet. Any idea how will this effect taxes this year?
  
I had a similar experience: https://www.fatwallet.com/forums/finance/1432908

You'll have to pay income tax on the FSA amount, but you still come out slightly ahead because you don't have to pay the FICA tax.


So if one working parent with a non-working spouse can deduct up to 5k and not use it, it's an easy 6.45% reduction in FICA taxes ($322.50)? Is this a common known loophole? (As long as you have the expenses to get reimbursed)

rated:
It seems like it and I often wondered, but my wife found a job so I didn't have an opportunity to find out. I doubt it's common because it doesn't make sense to keep paying for daycare if you have a parent at home who can care for the child for free.

rated:
doveroftke said:   It seems like it and I often wondered, but my wife found a job so I didn't have an opportunity to find out. I doubt it's common because it doesn't make sense to keep paying for daycare if you have a parent at home who can care for the child for free.
That depends on what your parents are like. 

rated:
Also depends on the child. We paid for a couple weeks of summer camp for our 6 year old even though my wife is a SAHM because she needed a break and our son needed a more socialized active outlet. Wife works part time seasonal though so we qualified for Dependent Care FSA.

rated:
good to know. we are sending the kid so that we get break and he gets to socialize

  • Quick Reply:  Have something quick to contribute? Just reply below and you're done! hide Quick Reply
     
    Click here for full-featured reply.


Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.

Thanks for visiting FatWallet.com. Join for free to remove this ad.

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2017