Dependent care is childcare or adult care you pay for so you can work, and you can use pre-tax FSA money to cover those costs

A Dependent Care FSA lets you set aside money from your paycheck before taxes are taken out, then use that money to pay for childcare or care for an adult who depends on you. The IRS defines dependent care narrowly: it must be care that allows you to work or look for work. Babysitting, preschool, after-school programs, summer camps, and adult day care all count. Overnight camps, school tuition (even if childcare is included), and care you provide yourself do not.

The money you contribute reduces your taxable income for the year, which means you pay less in federal income tax and Social Security tax. Your employer may also contribute to your account. You then submit receipts or invoices to your FSA plan administrator and get reimbursed. The catch is that money left unspent at the end of the plan year is forfeited — you cannot roll it over or get it back.

Key Takeaways

  • Dependent Care FSA money covers childcare and adult care expenses only when that care allows you to work, not for school tuition or overnight camps.
  • You contribute pre-tax dollars, which lowers your federal income tax and Social Security tax for the year.
  • You must submit receipts to your FSA plan administrator within the timeframe your plan allows, usually 60 to 90 days after the expense.
  • Any money left in your account at the end of the plan year is lost — there is no carryover, so estimate carefully what you will actually spend.
  • Your employer sets the contribution limit, but the IRS caps it at $5,000 per household per year for tax purposes.

What counts as dependent care under an FSA

The IRS has a specific definition: dependent care is care for a child under age 13, a spouse who cannot care for themselves, or a parent who cannot care for themselves and lives with you. The care must be provided by someone other than you or your spouse, and it must be necessary so that you (and your spouse, if married) can work or look for work.

Expenses that count include daycare centers, in-home babysitters, nannies, preschool programs, after-school care, summer day camps, and adult day care programs. Care for an elderly parent in an assisted living facility counts if you are paying for the care component, not the room and board. If you pay a family member to provide care — a grandparent, aunt, or cousin — that counts too, as long as they are not your spouse or a dependent you claim on your taxes.

Expenses that do not count include overnight camps, boarding schools, school tuition (even if the school provides before- or after-school care), babysitting while you shop or go out socially, and any care you provide yourself. Kindergarten and higher grades do not count, even if the school runs a before- or after-school program — only the program itself would count, not the school day.

How much you can contribute and how the IRS limits it

Your employer decides whether to offer a Dependent Care FSA and sets the contribution limit for your workplace plan. However, the IRS sets a maximum: you and your spouse combined cannot set aside more than $5,000 per household per year for dependent care expenses. If you are married and file taxes separately, the limit is $2,500 each.

The $5,000 limit is a tax limit, not a spending limit. Your employer's plan may allow you to contribute less. Some employers also contribute to employee FSAs as part of their benefits package — that contribution counts toward the $5,000 household limit. If you have a spouse who also has access to a Dependent Care FSA through their employer, the two of you together still cannot exceed $5,000 across both plans.

You choose your contribution amount during your employer's open enrollment period, usually once a year. The money comes out of your paycheck in equal amounts throughout the year. If your dependent care expenses change — a child ages out, you hire a nanny, or you switch to a different program — you may be able to change your contribution mid-year, but only if your plan allows it and the change is tied to a may have access to life event.

How to use your FSA money and get reimbursed

You pay the childcare provider or adult care facility out of pocket, then submit a receipt or invoice to your FSA plan administrator for reimbursement. The receipt must show the provider's name, the dates of care, the amount paid, and what the care was for. Some providers give you an invoice; others give you a receipt. Either works as long as it has those details.

Your plan administrator will tell you how to submit — usually online through a website or mobile app, by mail, or by email. Most plans require you to submit within 60 to 90 days of the expense. Once you submit, reimbursement typically takes one to two weeks. Some plans offer a debit card linked to your FSA account, which lets you pay the provider directly without waiting for reimbursement, though you still need to keep receipts in case the plan audits your account.

Keep all receipts and invoices for at least three years. The IRS can audit FSA accounts, and your plan administrator may ask you to prove that expenses were legitimate dependent care costs. If you cannot provide documentation, you may have to repay the reimbursement and owe taxes on it.

The use-it-or-lose-it rule and how to plan around it

Money left in your Dependent Care FSA at the end of the plan year does not roll over to the next year — it is forfeited. This is called the use-it-or-lose-it rule, and it applies to almost all FSA plans. If you contribute $3,000 and spend only $2,500, the remaining $500 is gone. You cannot withdraw it, carry it forward, or get it back as a refund.

Because of this rule, estimate conservatively. Add up what you actually spent on dependent care in the past year, then round down slightly. If your expenses are unpredictable — for example, you use a babysitter only occasionally — contribute less than you think you might spend. If you know your expenses will change — a child is starting kindergarten in September, or you are hiring a full-time nanny — adjust your contribution to match the months you will actually need care.

Some employers offer a grace period of up to 2.5 months into the next plan year to spend money from the previous year. If your plan has a grace period, you can submit receipts from January and February for expenses you incurred in December of the previous year. Ask your plan administrator whether your plan offers this option.

Dependent Care FSA versus the Child and Dependent Care Tax Credit

You cannot use the same expense for both a Dependent Care FSA and the Child and Dependent Care Tax Credit. You have to choose one or the other. The FSA reduces your taxable income upfront, which saves you money immediately through lower payroll taxes. The tax credit is claimed when you file your tax return and gives you a credit against the taxes you owe.

For most people, the FSA saves more money because it reduces both federal income tax and Social Security tax, while the tax credit reduces only income tax. However, if your income is very low or your dependent care expenses are very high, the tax credit might be better. You cannot know for certain without running the numbers both ways, so consider asking a tax professional or using tax software to compare.

If you use an FSA, you report the amount you spent on dependent care on your tax return, but you do not claim the tax credit for that same amount. Your employer will report your FSA contributions on your W-2, and you will account for them when you file.

What happens if your dependent care needs change mid-year

If your circumstances change — a child turns 13, you switch childcare providers, or you stop working — you may be able to change your FSA contribution mid-year. The IRS allows changes only for may have access to life events: birth or adoption of a child, change in your spouse's employment status, significant change in the cost of care, or change in your work schedule that affects your need for care.

You must request the change within 30 to 60 days of the event, depending on your plan's rules. Your employer will then adjust your contribution for the rest of the year. If you have already contributed more than you will spend, you may not be able to get the excess back — it will be forfeited at the end of the year. If you have not contributed enough, you can increase your contribution going forward.

If you leave your job, you lose access to your FSA. Any money remaining in your account is forfeited, even if you have not used it yet. Some plans allow you to continue coverage under COBRA, but you would have to pay the full premium yourself, and the money would still be forfeited at the end of the plan year.

Frequently Asked Questions

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

No. School tuition does not count, even if the school provides before- or after-school childcare. You can use FSA money only for the before- or after-school program itself, not for the school day or tuition. Kindergarten and higher grades are never covered.

What if I do not spend all my FSA money by the end of the year?

The money is forfeited. You cannot roll it over, withdraw it, or get it back as a refund. This is why it is important to estimate carefully. If your plan offers a grace period, you have up to 2.5 months into the next year to submit receipts for expenses from the previous year.

Can my spouse and I each have a dependent care FSA?

Yes, but your combined contributions cannot exceed $5,000 per household per year. If you are both employed and both have access to a Dependent Care FSA, you need to coordinate so that together you do not go over the limit.

Do I need receipts to get reimbursed from my FSA?

Yes. You must submit a receipt or invoice showing the provider's name, the dates of care, the amount paid, and what the care was for. Keep receipts for at least three years in case your plan audits your account.

What if my childcare provider does not give me a receipt?

Ask for one. Most providers will provide a receipt or invoice if you request it. If they refuse, you may not be able to get reimbursed from your FSA. Some plans accept a written statement from the provider if a formal receipt is not available, but this varies by plan.