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Examples of Savings
Matthew - a SMART employee
Administrative Coordinator
Matthew knows he will have dependent care expenses next year because his wife returns to work in January, after having given birth to their daughter in October. Matthew’s siblings have decided that he is best equipped to take on their ailing father who is unable to take care of himself. He will move in with Matthew in May and immediately begin going to adult daycare. Matthew is interested in the tax savings that the DCRP program provides and calculates dependent care expenses he thinks he will have in the next 12 months.
Matthew’s total dependent care expenses will exceed the maximum $5,000 that IRS rules allow. Therefore, he will contribute $5,000.
Matthew’s biweekly pre-tax contribution to his account is $208.33, and he reduces his taxable income by $5,000. He’s SMART.
Weekly dependent care service |
Cost |
Annual cost |
Nursery for the baby |
$75/week |
$3,675 for 49 weeks |
Adult daycare for Matthew’s father |
$60/week |
$1,680 for 28 weeks |
Total yearly expenses |
$5,355 |
|
Patsy - another SMART employee
Administrative Assistant
Patsy is interested in the DCRP program and wants to take advantage of the tax savings in this plan. She has one child that spends half of each day in kindergarten and half in daycare. Her second child is first grade and is at daycare for three hours. She pays $70 each week for their daycare. During open enrollment, she thinks about dependent care expenses she expects to have in the next twelve months.
During the plan year, Patsy will take four weeks of vacation to stay home with the children, but she will still have extra daycare expenses.
She estimates she will spend $524 for when the children are out of school and will be in daycare all day while she is at work. Patsy adds the total yearly cost for weekly daycare expenses, $3,360 to the additional daycare expenses, $524 to get a total yearly cost of $3,884.
Patsy’s biweekly pre-tax contribution to her account is $161.83 and she reduces her taxable income by $3,884. She’s SMART.
Weekly dependent care service |
Cost |
Annual cost |
After school daycare for children |
$70/week |
$3,360 for 48 weeks |
Total weekly expenses |
$3,360 |
|
Additional dependent care services |
Additional cost |
Annual cost |
Spring Break - Daycare for one week |
$50/week |
$50 for 1 week |
2 months during summer - Daycare for two months |
$50/week |
$400 for 8 weeks |
Week of Thanksgiving - Daycare for three days |
$24/three days |
$24 for three days |
1 week of Christmas Break - Daycare for entire week |
$50/week |
$50 for 1 week |
Total additional expenses |
$524 |
|
Total yearly expenses |
$3,884 |
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