This FSA benefit lets you use pre-tax dollars to pay for eligible employment-related dependent care expenses. It sets money aside from your paycheck before taxes are taken out. You can then use these funds to pay for eligible dependent care expenses throughout the plan year. You save money on expenses you’re already paying for like day care and preschool. Setting aside pre-tax dollars means you pay fewer taxes and increase your take-home pay.
Qualified Dependents:
- Your dependent child under the age of 13 who lives with you for MORE than half the year
- Any adult you can claim as a dependent on your tax return that is physically or mentally incapable of self-care and lives with you for MORE than half the year.
Qualified Expenses: The care provided to your dependent must be so you (or your spouse) can work or look for work. “Work” may include actively looking for a job. Work does not include unpaid volunteer work.
Expense Examples:
- Before & After School care
- Preschool or Nursery school
- Extended Day programs
- Au pair, Babysitter or nanny services
- Summer Day Camp
- Elder Day Care for a qualifying individual
Contributions & Income Tax Filings:
The current maximum employee contribution amount set by the IRS is $5,000 per year. If you are married and file separate tax returns, the maximum amount is $2,500 per spouse. If you are married and file a joint return, your combined maximum election amount is $5,000.
The dependent Care FSA follows the IRS “use-it-or-lose-it” rule, so budget your election accordingly. If you elect and contribute to Dependent Care FSA you may not be eligible to claim a Dependent Care Credit on your income tax filings. Speak with your tax advisor for further details.
Dependent Care FAQ's
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