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The amount of dependent care benefits you can exclude or deduct is limited to the smallest of:

  • The total amount of dependent care benefits you received during the year,
  • The total amount of qualified expenses you incurred during the year,
  • Your earned income,
  • Your spouse‚Äôs earned income, or
  • $5,000 ($2,500 if married filing separately)

Any benefits that are not excluded or deducted are included in your income. Taxable benefits will be reported with your wages on Line 1 of your tax return.

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