The Dependent Care FSA allows for a tax break on qualified child care or elder care expenses that you incur when you (and your spouse) are at work. You can set aside up to $5,000 per household, per calendar year, in these benefit plans — and the savings can be significant.
A Dependent Care FSA is a pretax savings account that allows you to lower your taxable income if you are incurring expenses while you work related to the care of an eligible dependent child(ren) under the age of 13, or a disabled adult dependent that lives with you at least eight hours per day and is incapable of self-care. If you are married, both you and your spouse must be working or attending school full-time to be eligible to participate. If you have a stay-at-home spouse, you should not enroll in the Dependent Care FSA.
A few examples of eligible expenses are:
- Nanny, au pair or babysitter
- Housekeeper who provides care for an eligible dependent (only the expense portion related to care)
- After-school care programs only if the expenses are itemized separately from tuition expense
- Adult daycare
Ineligible expenses include:
- Overnight camps
- Costs that are primarily for educational purposes such as tutoring
- Care provided by a dependent, your spouse or your child under the age of 19
- Care provided while you are not at work.
Click here for complete list of eligible expenses.
2022 Dependent Care FSA Quick Tips
The minimum annual election is $100; the maximum is $5,000 ($2,500 if you are married and file a separate tax return).
In general, the rules of the Dependent Care FSA follow that of the Health Care FSA except that any remaining funds in a Dependent Care FSA at the end of a Plan Year cannot be rolled over to the next Plan Year. A grace period for filing claims may apply, however.
You can only claim expenses for services that have been provided. The IRS does not permit reimbursement for future services. For example, if you are required to pre-pay all of January’s child care expenses on January 1, you cannot claim the entire month’s expense until the end of January. Alternatively, you could claim one week’s worth of expenses every week at the end of each week.
Remember: your election is fixed for the entire year unless you have a qualifying event.