"Dependent Care Benefits Added to Income"

edg16

I am a federal employee with a Flexible Spending Account (FSA) that allowed me to have $5000 deducted from my pay in 2025 to go towards daycare expenses for my child. When I went to file, I saw the alert "Dependent Care Benefits Added to Income." Does that mean that $5000 was added back into my taxable income for the year? And if so, would I need to go in and reduce my Wages & Tips by $5000?

Taylor

Hello edg16,

This can happen if you do not enter any qualified Child Care Expenses on the tax return.

Enter your expenses under: Deductions & Credits > Child Care Credit

When you have a dependent care plan through your work with benefits in Box 10 of your Form W-2, these have already reduced your W-2 Box 1 wages so you may not qualify for the Child Care Credit. However, by entering qualified expenses in the Child Care Credit screens, this will typically exclude the benefits from being taxable.