How it works
Money in a dependent care FSA comes out of your pay before federal and state income tax and before FICA. The child and dependent care credit is a percentage of up to $3,000 of costs for one child or $6,000 for two or more, but any dollar the FSA paid comes off that $3,000 or $6,000 first, so the same cost can't count twice. From 2026 the FSA limit is $7,500 and the credit starts at 50%, falling by one point for each $2,000 of AGI over $15,000 to 35%, then to 20% above $75,000 of AGI ($150,000 for a joint return). The calculator tries every election, dollar by dollar. In the example, a married couple with two children, $14,000 of child care and $140,000 of AGI in the 22% bracket: the credit alone is 35% of $6,000, $2,100. Putting $7,500 in the FSA saves 34.65% of it, $2,598.75, but leaves no credit. Splitting is worse than either: $3,000 in the FSA and the credit on the other $3,000 saves $2,089.50. A lower tax bracket or a smaller FSA limit can flip the answer, which is why it's worth running your own numbers.