A dependent care flexible spending account or DC-FSA is an arrangement through your employer that lets you pay for eligible dependent care expenses with tax-free dollars.
Eligibility
It's simple to have a Dependent Care FSA—your employer just needs to offer it!
For eligibility in using the funds, you must have a dependent who is:
A child under age 13;
Your spouse or other tax dependent (regardless of age) who is mentally or physically incapable of self-care.
The care expenses being claimed must meet the following conditions:
is not for your dependent's health care expenses
incurred in order for you and your spouse to
work
look for work, as long as you found a job and have earned income
attend school full-time
the expense is not for someone you can claim as your dependent on your federal income tax return or to your child who is under age 19
you file taxes as single, qualifying widow(er) with a dependent child, married filing jointly, or married filing separately
the expense was provided for one or more qualifying persons identified on the claim.
your qualifying dependent must live in your home for more than half of the year
must not be claimed under the Dependent Care Tax Credit
Limits
| Family - Maximum Contribution | Married, Filing Separately - Maximum Contribution |
2023 | $5,000/yr | $2,500/yr |
2024 | $5,000/yr | $2,500/yr |
While rollover is not allowed for Dependent Care FSA, some employers may choose to allow up to a 2.5-month extension to the DC-FSA spending deadline.
Eligible DC-FSA Expenses
Expense | Requirements/Limitations |
Nursery school/Preschool | Must be:
|
Before/After school program | Must be:
|
Au pair |
|
Babysitting/Nanny | Must be:
Can be:
|
Extended care | Must be:
|
Day Camp |
|
Sick child care |
|
Adult/Senior daycare |
|
Eldercare | Can be:
|
Housekeeper who cares for your dependent | Limited to:
|
Payroll taxes | Must be:
|
Payment Processing Fees | Must be:
|
Transportation (to/from) | Must be:
|
Ineligible DC-FSA Expenses
Expense | Details |
Educational Costs / School Tuition | While nursery and preschool expenses are eligible, educational costs or school tuition (i.e., kindergarten, summer school, tutoring, school tuition) are not eligible expenses. The 'educational' aspect of nursery and preschool costs is only incidental per the IRS. |
Overnight Camp | Is ineligible even if the day camp portion is billed separately. |
Food and clothes | Is ineligible even if it's for your dependent. |
DC-FSA and the Dependent Care Tax Credit
If you have dependents, chances are you may have heard of the Dependent Care Tax Credit or DCTC. DCTC allows taxpayers to claim tax credits for dependent care expenses.
You can take advantage of a Dependent Care FSA and the Dependent Care Tax Credit to save more; however, you are not allowed to claim an expense on both.
You can either use DC-FSA funds or claim a tax credit under DCTC for out-of-pocket dependent care expenses.