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So I guess you can get a little bit of a double dip. You can exclude $5k from income AND take a credit for the last $1k of expenses.

From a similar discussion elsewhere...

This year will be the first year I will be able to prove payment of all daycare expenses for both kids. Our decree states we each get one kid as a dependent on our taxes. So, he will be claiming one, but I will also have daycare expenses for the one that he claims.

Since he will not be claiming daycare expenses, can I claim expenses on that child even if I cannot list him as a dependent? I can prove his address is mine, but we *legally* have joint custody - mine is the primary residence and the one used for education purposes and most living time, and I am to be given child support. I pay daycare directly.

Also, what about years where I have unbalanced amounts? Could I still take $5k pre-tax and the $1k credit even if the expenses were over $3k for one kid and under $3k for the other?

Assuming my employer implements and I can fully fund $5k by the end of the year, if I can claim this second child's expenses I would still be able to use $1k for the credit this year and for a few more years.

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