Dependent Care Flexible Spending Account

What It is

A Dependent Care Flexible Spending Account (Dependent Care FSA) is set up to reimburse employees for their eligible dependent care expenses, including daycare expenses for children under the age of 13, a disabled spouse and/or a disable relative or household member who depends on the account holder for at least half of his/her support. In order to participate, employees must elect the annual amount they want to contribute to their Dependent Care FSA, up to $5,000 (as determined by IRS Code section 125(i)), prior to the start of their employer’s benefit plan year. Each employer determines the maximum amount an employee may contribute to their dependent care FSA during a benefit plan year, so they may offer a lower annual maximum amount.

Wondering what qualifies as an “eligible expense”? Click below for a list of eligible FSA items.

How It Works

Throughout the course of the benefit plan year, a portion of the employee’s annual election amount will be deducted pre-tax from each paycheck to fund the account, until the annual election amount is reached. Unlike the Medical FSA, the Dependent Care account is not pre-funded, so employees are only able to spend what they have contributed in payroll deductions at a given time. Over the course of the benefit plan year, the full amount of the employee’s annual election will be deducted pre-tax, lowering an employee’s taxable income and maximizing tax savings.

Use the tax calculator below to see how much you could be saving by participating in a Dependent Care FSA!