What a Dependent Care FSA Pays For

A Dependent Care FSA is a workplace account where you set aside pre-tax money to pay for childcare or adult dependent care while you work. The account reimburses you for costs like daycare centers, after-school programs, summer camps, preschool, and in-home babysitters. It also covers care for elderly parents or disabled family members if that care allows you to work.

The money comes out of your paycheck before taxes are taken, which lowers your taxable income for the year. Your employer may also contribute to the account, though this is less common than with Health FSAs. You then submit receipts or invoices to your plan administrator and receive reimbursement, usually within one to two weeks.

The account does not cover education costs like tuition or school supplies, even if the facility is a school. It also does not cover overnight camps, activities that happen outside work hours (like weekend sports), or care you provide yourself.

Key Takeaways

  • A Dependent Care FSA holds pre-tax money you set aside to pay for childcare or adult dependent care that enables you to work.
  • You choose how much to contribute each year during open enrollment, and that amount is deducted from your paychecks before taxes.
  • The annual contribution limit is set by the IRS and changes yearly; for 2024 it is $5,000 for married couples filing jointly or single filers, and $2,500 for married couples filing separately.
  • You must submit receipts and proof of payment to your plan administrator to receive reimbursement, and unused money at year-end is forfeited.
  • Your employer must offer the plan for you to participate; it is not something you can open on your own.

How Much You Can Contribute Each Year

The IRS sets an annual limit on how much you can put into a Dependent Care FSA. For 2024, the limit is $5,000 per year if you are single or married filing jointly, or $2,500 if you are married filing separately. Your employer may set a lower limit, so check your plan documents.

You choose your contribution amount during your employer's open enrollment period, usually once a year in the fall or winter. The money is then divided evenly across your paychecks for the rest of the year. If you have a may have access to life event — such as the birth of a child, a change in your childcare arrangement, or a change in your spouse's employment — you may be able to change your contribution amount outside of open enrollment.

The contribution limit can change each year. The IRS adjusts it for inflation, so check your plan materials or your employer's benefits website before each enrollment period to confirm the current year's limit.

What Counts as Dependent Care Expenses

Dependent Care FSA money can pay for care that allows you to work. This includes daycare centers, family childcare homes, after-school programs, and in-home babysitters or nannies. It also covers preschool if the primary purpose is childcare while you work, not education. Summer day camps and before-school programs also may have access to.

The care must be for a dependent under age 13, or for a spouse, parent, or other family member who is physically or mentally unable to care for themselves and lives with you for more than half the year. If you are paying for care so both you and your spouse can work, the expense is covered.

Expenses that do not may have access to include overnight camps, tuition for kindergarten or higher grades, school supplies, activities outside work hours, and any care you provide yourself. You also cannot use the account to pay for care that happens while you are not working, even if it is at a childcare facility.

How to Submit Receipts and Get Reimbursed

After you pay for dependent care, you submit a receipt or invoice to your plan administrator to request reimbursement. Most plans let you submit online through a website or mobile app, by mail, or by email. The receipt must show the name of the care provider, the dates of service, the amount paid, and what service was provided.

Your plan administrator reviews the receipt to make sure it is for a covered expense, then sends you a reimbursement check or deposits the money into your bank account. This usually takes one to two weeks. Keep copies of all receipts for your records and for tax purposes.

Some plans offer a debit card that you can use to pay the care provider directly, which skips the reimbursement step. Ask your plan administrator whether this option is available to you.

The Use-It-or-Lose-It Rule

Money left in your Dependent Care FSA at the end of the plan year is forfeited — you cannot carry it over to the next year or get it back as a refund. This is called the use-it-or-lose-it rule, and it is a key reason to estimate your expenses carefully before you contribute.

Some employers offer a grace period of up to 2.5 months into the next year to submit receipts for expenses you incurred in the prior year. A few plans also allow you to carry over up to $570 (the 2024 limit) to the next year, but this is rare. Check your plan documents to see whether either option applies to you.

If you have a major change in your childcare costs — such as a child starting school or a care provider closing — you may be able to change your contribution amount mid-year. Contact your plan administrator or your employer's benefits office to ask whether a change is allowed.

How a Dependent Care FSA Differs From Other Options

A Dependent Care FSA is different from a Child and Dependent Care Tax Credit, which is a tax deduction you claim on your tax return. With the FSA, you set money aside before taxes and use it to pay for care. With the tax credit, you pay for care with after-tax money and then claim a credit when you file your taxes. You cannot use both for the same expenses in the same year, so you will need to decide which option saves you more money.

A Dependent Care FSA is also different from a Health Savings Account (HSA) or a Health FSA, which are for medical expenses only. Dependent care is a separate account with its own contribution limit and rules.

Some states and cities also offer dependent care subsidies or tax credits. These may be used alongside a Dependent Care FSA, but the rules vary by location. Contact your local workforce development office or your state's department of human services to learn what programs are available where you live.

Frequently Asked Questions

Can I use dependent care FSA money to pay for my child's school tuition?

No, tuition is not covered. However, if the school offers before-school or after-school childcare programs, you can use FSA money to pay for those programs specifically. The money must go toward the care component, not the education component. Ask the school to provide a separate invoice for childcare services if they offer both.

What happens to my FSA money if I leave my job?

Any money left in your account is forfeited when you leave. You do not get a refund, and you cannot transfer the balance to a new employer's plan. If you are leaving your job, try to use up your remaining balance before your last day by submitting receipts for recent care expenses.

Can I change my contribution amount if my childcare costs go up or down?

You can change your amount during open enrollment each year. If you have a may have access to life event — such as a change in your childcare arrangement, the birth of a child, or a change in your spouse's job — you may be able to change your amount outside of open enrollment. Contact your employer's benefits office to ask whether your situation qualifies.

Do I need to report dependent care FSA reimbursements on my tax return?

No, reimbursements from a Dependent Care FSA are not reported as income on your tax return. However, you cannot claim the Child and Dependent Care Tax Credit for the same expenses you paid for with FSA money. Keep your receipts in case the IRS asks for proof that you paid for covered care.

Can my employer contribute money to my dependent care FSA?

Yes, some employers do contribute to employee Dependent Care FSAs, though this is less common than employer contributions to Health FSAs. If your employer offers this, the contribution is not counted toward your annual limit. Ask your benefits office whether your employer makes contributions and how much.