Flexible spending accounts, or FSAs, save you money because you can pay for eligible expenses with tax-free dollars.
How It Works
- You must re-enroll every year. See how to enroll.
- You decide how much to contribute to your Dependent Care FSA—between $26 and $5,000 per plan year (August 1–July 31). Note: If your spouse also has access to a Dependent Care FSA, your total combined contribution may not exceed $5,000. If you are married and file separate tax returns, each spouse may contribute $2,500.
- Your plan year contribution will be deducted from your paycheck before federal, state, local and Social Security taxes are withheld. Your Form W-2 will include your calendar year (not plan year) contribution.
- Expenses must be paid for and used during the same plan year. You have until October 31—three months following the end of the plan year—to submit claims for reimbursement.
- If you enroll during the year, be sure to prorate your contribution for the number of pay periods remaining in the plan year (August 1–July 31).
Eligible Day Care Expenses
You can use the Dependent Care FSA to pay for the day care of:
- Your dependent children under the age of 13.
- Dependents of any age who are incapable of self-care, live with you at least eight hours a day, and are claimed as dependents on your income tax return.
Eligible day care must:
- Be provided while you (and your spouse, if you are married) work, look for work or attend school full time.
- Be provided in your home by an eligible provider or at a licensed facility. You will not be reimbursed for residential or "sleep-away" care, nursing home care, or for babysitting when you are not at work.
- Not be provided by your spouse, a child of yours under age 19, or any dependent you claim as an exemption on your federal income tax.
For a full list of eligible expenses, see IRS Publication 503, Child and Dependent Care Expenses.
Dependent Care Tax Credit
Expenses that are eligible for the Dependent Care FSA can also be eligible for a tax credit on your federal tax return. Keep in mind that you cannot claim the same expenses for the Dependent Care FSA and the tax credit. Talk with your personal tax advisor to determine which alternative is best for you.