|
AN EXAMPLE: Dependent Care Spending Account
Here's an example based on 2001 Federal Tax schedules. The example shows how you could reap
greater tax savings and increase your spendable income by using the Dependent Care Spending Account.
Let's assume:
- A married employee with two children
- Filing a joint return with standard deductions
- $65,000 in combined annual income
- $5,000 in Dependent Care expenses
| Annual Family Income |
$65,000 |
$65,000 |
| Before-tax Contribution to Spending Account |
-$0 |
$5,000 |
| Adjusted Gross Income |
$65,000 |
$60,000 |
| Standard Deductions & Exemptions |
$18,200 |
$18,200 |
| Taxable Income |
$46,800 |
$41,800 |
| Federal Income & FICA Tax |
$12,474 |
$10,856 |
| After-tax for Care |
-$5,000 |
$0 |
| Spendable Income |
$47,526 |
$49,144 |
| Your Savings |
$0 |
$1,618 |
In this example, using the Dependent Care Spending Account results in more spendable income. But
remember, this is only an example. The best approach for you, and your actual savings, will depend on
your income and tax situation.
|
 |
|