[quote author="ocjohn" date=1240406944]Dependent care, whether it is a child or parent etc., is tax deductible in two ways. First, there is a maximum $5K limit in your flexible spending account that you select in October or November for the following year. This is a one for one tax deduction that reduces your income at the W-2 level. In addition, there is a second child care only tax credit which is only good for $3K for one child or $6K for two. With the FSA option, you can choose the credit for the remaining $1K. However the credit is income limited and only a partial credit. For higher income wage earners, it quickly drops to a credit at 20% of the spending amount. CA has a similar credit but it can be turned to zero by lower income limits. The FSA is probably your best bet.</blockquote>
You are confusing 1) a reduction in gross taxable income and 2) a tax credit with a tax deduction. Childcare is not tax deductible. You will not find it on a Schedule A where tax deductions are indicated. Tax credits and deductions do not function in the same fashion, i.e. they have different impacts on one's tax liability.
You have over-simplified with regards to the FSA. Not everyone can utilize a dependent care FSA. It's an employer-sponsored (not funded) and maintained plan and not all employers offer them. If your employer doesn't offer it, you can't just sign up for one retail... Also, FSA plan years are not necessarily on a calendar basis. For example, the one IUSD offers runs July-June. They open enroll in May... One may not even be able to utilize an DCFSA if a spouse is already participating in one via their employer at the $5K annual limit.