Estimating Dependent Care Expenses        
1 Compute the total amount of your dependent care expenses.  Be sure to take into account vacations or other periods where no dependent care is incurred.  
2 You can contribute up to a maximum of $5,000 per calendar year to the Dependent Care Spending Account.  This limit reduces to $2,500 if you are married and filing separate tax returns.  Other limitations apply if your spouse is disabled or is a full-time student.  The amount contributed cannot exceed the lesser of your income or your spouse's earned income.  
  Cost / Week x Number of Weeks =  
  How many children do you have:      
  How do you file your taxes        
    (1 for Single, 2 for Head of Household, 3 for Married filed jointly)  
Federal Tax Credit for Dependent Care Expenses      
Calculating the Federal Tax Credit          
1 The estimated annual dependent care expenses (total from above)    
2 Maximum expenses eligible for tax credit    
3 Total adjusted gross income for you and your spouse    
4 Tax credit percentage based on total income    
5 Estimated Tax Credit (multiply line 4 by the smaller of line 1 or line 2)  
Calculating Tax Savings Using the Dependent Care Spending Account  
1 The estimated annual dependent care expenses (total from above)    
2 Marginal Federal tax rate using your combined income for you and your spouse  
3 Social Security tax rate    
4 State tax rate    
5 City tax, if applicable    
6 Total tax rate (add lines 2, 3, 4 and 5)    
7 Estimated Tax Savings (multiply line 4 by line 6)    
Comparing the Calculations  
After you have estimated your dependent care expenses, calculate the Federal Tax Credit and the withholding tax savings using the dependent care spending account and compare the two calculations.  You can then make an informed choice as to which alternative is best for you, or consult your tax advisor.  
The Federal Tax Credit is for Federal income tax purposes and does not include Social Security or State income taxes.  Generally, if your income tax bracket is greater than the percentage allowed from the tax credit, the Dependent Care Spending Account is the better choice for making the most of your earned income.  If the percent allowed for the Federal Tax Credit is greater, it is likely that the credit may be a better choice for you.