How a Dependent Care FSA works in practice
A Dependent Care FSA lets you set aside pre-tax money from your paycheck to pay for childcare, preschool, after-school programs, or care for an adult dependent — typically a parent or disabled family member. You contribute money before taxes are taken out, which lowers your taxable income for the year. When you have a care expense, you pay it out of pocket first, then submit a claim to your FSA administrator with a receipt or invoice, and they reimburse you from your account.
The money you contribute is yours to use during the plan year, but it does not roll over. Most plans follow a calendar year (January through December), though some employers use different plan years. You must decide how much to contribute during your employer's open enrollment period, usually in the fall, and that amount is locked in for the entire year.
The IRS sets an annual contribution limit, which changes each year. For 2024, the limit is $5,000 per household per year (or $2,500 if you are married and file taxes separately). Check with your employer or plan administrator for the current year's limit, as it may differ from previous years.
Key Takeaways
- You contribute pre-tax money during open enrollment, and your employer deducts it from your paychecks throughout the year.
- You pay care providers out of pocket, then submit receipts to your FSA administrator to get reimbursed from your account.
- Dependent Care FSAs cover daycare, preschool, after-school care, summer camps, and adult dependent care — but not overnight camps or tuition for K-12 school.
- Unused money at the end of the plan year is forfeited; there is no rollover, so estimate carefully what you will actually spend.
- You must have a may have access to care expense and a dependent who needs care while you (and your spouse, if married) work or attend school.
What expenses the FSA will and will not cover
Dependent Care FSAs cover the cost of care that allows you to work or, if you are a student, to attend school. This includes daycare centers, in-home babysitters, nannies, preschool programs, after-school care, and adult day care for an elderly or disabled dependent. The care provider can be anyone — a family member, a neighbor, a licensed facility — as long as you have documentation of the expense.
The FSA does not cover tuition for kindergarten through 12th grade, even if the school provides before- or after-school care. It does not cover overnight camps, summer programs that are primarily educational or recreational rather than care-focused, or care for a child over age 13 (with rare exceptions for disabled dependents). It also does not cover care you provide yourself or care by a spouse or dependent child.
You cannot use the FSA to pay for care that happens while you are not working — for example, childcare during a vacation or weekend outing. The IRS requires that the care expense be necessary for you to work or attend school.
How to submit a claim and get reimbursed
The process starts when you receive an invoice or receipt from your care provider. The document should show the provider's name, the dates of care, the amount charged, and ideally their tax ID or Social Security number (though requirements vary by plan). Keep these documents; you will need them to support your claim.
Log into your FSA administrator's website or mobile app — your employer will tell you which company manages your plan (common ones include WageWorks, HealthEquity, and Conduent). Most plans let you submit claims online by uploading a photo of the receipt or entering the details manually. Some plans also accept claims by mail or email. Check your plan's website for the specific process and any deadlines for submitting claims.
After you submit, the administrator reviews the claim to make sure it meets FSA rules. This usually takes one to two weeks. Once approved, they reimburse you by direct deposit, check, or debit card — depending on your plan. Some plans offer a debit card that you can use to pay providers directly, which skips the reimbursement step, but not all providers accept FSA debit cards.
Choosing the right contribution amount
The hardest part of using a Dependent Care FSA is deciding how much to contribute, because any money you do not spend by the end of the plan year is forfeited. You cannot carry it over to next year or get it back as a refund. This is called the "use-it-or-lose-it" rule, and it is a real trade-off: the tax savings are valuable, but only if you spend what you set aside.
Start by adding up your actual care costs for a full year. If you pay a daycare center $1,200 per month, that is $14,400 per year. If you hire a babysitter for 10 hours a week at $20 per hour, that is roughly $10,400 per year. Write down the number. Then subtract any care costs you know will not happen — weeks when you take unpaid leave, times when a grandparent provides free care, or planned schedule changes.
Be conservative. It is better to contribute $4,000 and spend $3,800 than to contribute $5,000 and spend $4,200. The $800 you do not use is gone. If you are unsure, start with a lower amount and increase it next year once you have real spending data. You can also change your contribution if you have a may have access to life event — a birth, adoption, change in childcare costs, or change in your work schedule — but routine changes are only allowed during open enrollment.
Coordination with other tax benefits
If you use a Dependent Care FSA, you cannot also claim the Dependent and Child Care Credit (also called the Child and Dependent Care Credit) on your federal tax return for the same expenses. You have to choose one or the other. For most families, the FSA saves more money because it reduces your taxable income before taxes are calculated, but the math depends on your income and tax bracket. Talk to a tax professional or use a tax software calculator to compare the two for your situation.
Some employers also offer a Child and Dependent Care Credit as part of their benefits package — this is different from the IRS tax credit and is not subject to the same restriction. Check your benefits guide to see if your employer offers this, and if so, whether you can use both it and the FSA.
If you are self-employed or a business owner, you cannot open a Dependent Care FSA through an employer plan. You may be able to deduct dependent care expenses directly on your tax return, but the rules are different. Consult a tax professional about your options.
What happens if you change jobs or leave employment
If you leave your job or are laid off, you typically have 30 to 60 days (depending on your plan) to submit claims for expenses you incurred while you were employed. After that window closes, you lose access to any remaining balance. This is another reason to keep careful records and submit claims promptly.
If you move to a new job with a different employer, you cannot transfer your FSA balance to the new employer's plan. The old plan ends, and any unused money is forfeited. However, you may be able to open a new Dependent Care FSA with your new employer if they offer one. You will start fresh with a new contribution amount for the new plan year.
If you are laid off or fired, you may have the right to continue your FSA coverage under COBRA (Consolidated Omnibus Budget Reconciliation Act), though this is less common for FSAs than for health insurance. Check with your former employer's benefits department to see if COBRA is available for your plan.
Common mistakes to avoid
The most common mistake is overestimating how much you will spend and losing money at the end of the year. The second is submitting a claim without proper documentation — a receipt or invoice with the provider's name, dates, and amount. Without this, the administrator will deny the claim and you will not be reimbursed.
Another mistake is trying to use FSA money for expenses that do not meet the IRS definition of dependent care. Tutoring, music lessons, and sports programs are not covered, even if they keep your child occupied while you work. The care must be primarily custodial — keeping your dependent safe and cared for — not educational or recreational.
Finally, do not assume your FSA debit card works everywhere. Some providers do not accept it, and you will need to pay out of pocket and submit a claim instead. Call your care provider ahead of time to ask what payment methods they accept.
Frequently Asked Questions
Can I use my Dependent Care FSA to pay for preschool?
Yes, if the primary purpose is care while you work. Preschool that happens during your work hours and allows you to be employed counts as a care expense. However, if the preschool is primarily educational and you are not working during those hours, it does not may have access to. The IRS looks at the substance of the arrangement, not just the name of the program.
What if my care provider does not have a tax ID or Social Security number on the receipt?
Ask the provider to add it to the receipt or give you a separate document with that information. Your FSA administrator needs it to process the claim. If the provider refuses or cannot provide it, contact your plan administrator to ask what documentation they will accept — some plans are more flexible than others, but most require some form of provider identification.
Can I use FSA money to pay a family member for childcare?
Yes, you can pay a parent, sibling, or other relative to provide care, as long as they are not your spouse or a dependent you claim on your taxes. You still need a receipt or invoice showing the amount and dates of care. If you pay a family member more than $2,300 in a year, they may owe self-employment taxes, so keep records and consider consulting a tax professional.
What happens to my FSA if I take unpaid leave or go on maternity leave?
Your FSA contributions typically continue during unpaid leave if you are still employed and your health insurance continues. However, you may want to reduce your contribution for the year if you know you will not be paying for care during that time. Contact your benefits department to discuss your options before your leave begins.
Can I use my FSA for care during school breaks or summer?
Yes, as long as the care is necessary for you to work. Summer camp, after-school programs during the school year, and care during school breaks all count. However, overnight camps and camps that are primarily recreational or educational do not may have access to. Day camps and programs that provide supervision while you work are covered.