Dependent Day Care FSA

The Dependent Day Care FSA is designed to help you pay for the cost of child and/or adult care so that you – or if you’re married, you and your spouse – can work.

You can claim expenses for:

  • any child under age 13 who you can claim as your dependent for federal income tax purposes
  • your spouse who is physically or mentally unable to care for himself or herself and who lives with you for more than half the year
  • any other person who is physically or mentally unable to care for himself or herself, who lives with you for more than ½ the year and who you can claim as a dependent for federal income tax purposes (without regard to their gross income).

For expenses related to services outside your home to be eligible, a dependent (other than a child under age 13) must spend a minimum of eight hours a day in your home.

You can contribute from $120 to $5,000 to this account each calendar year. If you are married and your spouse also has a Dependent Day Care FSA, your combined contribution cannot be greater than $5,000. If you and your spouse file separate tax returns, you are each limited to a $2,500 contribution ($5,000 combined contribution).

With the Dependent Day Care FSA, you can be reimbursed only up to the amount in your account at the time of your claim. If there aren’t sufficient funds at the time you submit your claim, the balance will be paid as your contributions accumulate in your account.

Considerations for Participation -

  • Do you have regular day care expenses for a child? What do you expect to pay in the coming year?
  • Do you take care of a dependent adult?
  • Will you pay for after-school care or summer day camp? If so, what do you expect to pay?
  • Will you pay tuition for nursery school? If so, what do you expect to pay?
  • Which is better for you – participating in the Dependent Day Care Account or taking the federal dependent care tax credit?

The IRS specifies the kinds of expenses that can be paid through your Dependent Day Care FSA. Here are some eligible expenses:

  • Child care given in your home or in someone else’s home*
  • Expenses for a dependent day care center that meets all state and local licensing requirements
  • Pre-school expenses
  • After-school child care
  • Summer day camp
  • Adult day care, either in your home or an adult day care center

* When filing a dependent care claim, you must provide the caregiver’s name, address, telephone number and Social Security number or taxpayer identification number. Without this information, the care will not qualify as an eligible expense.

For a detailed list of eligible dependent day care expenses, you should refer to IRS publication 503 at www.irs.gov.

Keep in mind that your contributions can be limited by several factors: your tax filing status; your spouse’s participation in a similar plan; if your spouse is disabled or a full-time student; or if you use the dependent care tax credit. In most cases, using the Dependent Day Care FSA is better than the tax credit available for child care. Your personal circumstances will determine which is best for you and you may want to consult your tax advisor before making your decision.