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Compute the tax savings of these two alternatives

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Reference no: EM13910022

Eileen files as head of household and earns $75,000. She has a 4 year old dependent daughter for whom she pays $5,000 in annual day care expenses so that she can work. Eileen's employer offers a dependent care flexible spending arrangement (FSA) in which she could contribute up to $5000 on a pre tax (before income tax and FICA tax) basis. If she does not participate in FSA, Eileen can claim a dependent care credit for these expenses. Eileen has no other income or deductions. Compute the tax savings of these two alternatives and make a recommendation to Eileen. 

Reference no: EM13910022

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