What dependent care benefits are and how they fit into your FSA
Dependent care benefits let you set aside pre-tax money through your FSA to pay for childcare, adult day care, or elder care while you work. The money comes out of your paycheck before taxes are calculated, which lowers your taxable income for the year. You then use that money to reimburse yourself for care expenses you actually paid.
This is separate from the medical portion of your FSA. Your employer may offer both a healthcare FSA and a dependent care FSA, or only one. If your employer offers both, you fund them independently — money in one account cannot be moved to the other.
The dependent care FSA is sometimes called a Dependent Care Account or DCA. It works the same way as a healthcare FSA: you choose how much to contribute during open enrollment, the money is deducted from your paychecks throughout the year, and you submit receipts to get reimbursed.
Key Takeaways
- Dependent care FSA money is deducted from your paycheck before taxes, reducing the income you pay federal, state, and Social Security taxes on.
- You can use the account to pay for childcare, preschool, adult day programs, or elder care services — but only for care that allows you or your spouse to work.
- The annual contribution limit is set by the IRS and changes each year; for 2024 it is $5,000 per household.
- You must submit receipts or invoices showing what you paid and when; reimbursement typically takes one to two weeks after the plan receives your claim.
- Money left unspent at the end of the plan year is forfeited — there is no rollover to the next year.
What expenses the dependent care FSA covers
The dependent care FSA covers the cost of care for a may have access to dependent — someone you claim on your tax return who cannot care for themselves while you work. This includes children under age 13, adult children with disabilities, spouses who are incapable of self-care, and elderly parents or in-laws you support.
Covered care includes daycare centers, in-home babysitters, nannies, preschool, before- and after-school programs, summer day camps, and adult day care or senior care facilities. The key rule: the care must allow you (and your spouse, if married) to work or look for work.
The FSA does not cover overnight care, tuition for school-age children (K–12), or care during school hours while school is in session. It also does not cover educational programs like music lessons or sports camps, even if they happen while you work.
How much you can contribute and the annual limit
You choose your contribution amount during your employer's open enrollment period, usually in the fall. The money is then divided evenly across your remaining paychecks for the year. For 2024, the IRS limit is $5,000 per household per year. This limit applies whether you are single or married filing jointly — it is a household cap, not per-person.
If you are married and both work, you still cannot contribute more than $5,000 combined to dependent care FSAs. Some employers set their own lower limit, so check your plan documents to see what your employer allows.
The annual limit changes periodically based on inflation adjustments. Your employer will announce the new limit during open enrollment each year. If you do not contribute during open enrollment, you generally cannot start or change your contribution until the next open enrollment period — unless you have a may have access to life event like a birth, adoption, or change in your spouse's employment.
How to submit receipts and get reimbursed
After you pay for dependent care out of pocket, you submit a claim to your FSA plan administrator with proof of the expense. Most plans accept claims through an online portal, by mail, or through a mobile app. You will need an itemized receipt or invoice showing the provider's name, the dates of care, the amount paid, and what service was provided.
The plan administrator reviews your claim to make sure the expense is covered and that you have not exceeded the annual limit. If everything is in order, they reimburse you — usually by check, direct deposit, or debit card — within one to two weeks. Keep copies of all receipts for your records and for tax purposes.
Some employers offer a dependent care debit card that you can use to pay providers directly, which skips the reimbursement step. If your plan offers this, ask whether the card is accepted by your childcare provider before you enroll.
The "use it or lose it" rule and what happens to leftover money
Money you do not spend by the end of your plan year is forfeited. There is no rollover to the next year, and you cannot get a refund. This is called the use-it-or-lose-it rule, and it is a significant difference from a healthcare FSA, which allows a small carryover in some plans.
Because of this rule, you should estimate your dependent care costs carefully before you enroll. If your childcare costs vary — for example, because school is out in summer but your child is in care year-round — add up what you actually spend in a typical year and contribute that amount.
Some employers offer a grace period of up to 2.5 months after the plan year ends, during which you can submit claims for expenses incurred in the final months of the previous year. Check your plan documents to see if your employer allows this.
Tax savings and how much money you actually keep
The main benefit of a dependent care FSA is the tax savings. Because the money is deducted before taxes, you pay no federal income tax, no Social Security tax (6.2%), and no Medicare tax (1.45%) on that money. Depending on your tax bracket and state, you might save 25 to 40 cents on every dollar you contribute.
For example, if you contribute $5,000 to a dependent care FSA and you are in the 22% federal tax bracket plus 6.2% Social Security and 1.45% Medicare, you save roughly $1,470 in taxes. That is money that stays in your pocket instead of going to the government.
However, this tax savings is only valuable if you actually use the money. Because of the use-it-or-lose-it rule, contributing more than you spend means you forfeit the unused balance — which wipes out the tax savings on that portion. Contribute conservatively if your childcare costs are unpredictable.
How dependent care FSA differs from the Child and Dependent Care Tax Credit
The dependent care FSA is different from the Child and Dependent Care Tax Credit, which is a tax credit you claim on your tax return. You cannot use the same expense for both — if you use money from your dependent care FSA to pay for care, you cannot also claim that expense on the tax credit.
In most cases, the FSA saves you more money because it reduces your taxable income, whereas the tax credit only reduces your tax bill. However, if your income is very low or your childcare costs are high, the tax credit might be better. You should review both options during open enrollment to see which one works better for your situation, or talk to a tax preparer.
Frequently Asked Questions
Can I use dependent care FSA money to pay a family member who watches my child?
Yes, you can pay a relative — a grandparent, aunt, or older sibling — as long as they are not your spouse or a dependent you claim on your taxes. You will need a receipt or written agreement showing the amount paid, the dates, and what service was provided. If you pay a family member more than $2,100 in a year, you may also need to report it as wages and handle payroll taxes.
What happens to my dependent care FSA if I leave my job?
When you leave your job, your FSA coverage ends. You have until the end of your employer's plan year to submit claims for expenses you incurred while you were employed. After that, any unused balance is forfeited. If you move to a new job with an FSA, you can enroll in the new plan during your new employer's open enrollment, but you cannot transfer the old balance.
Can I change my contribution amount during the year?
No, unless you have a may have access to life event — such as a birth, adoption, marriage, divorce, or significant change in childcare costs due to a provider closing. If you have a may have access to event, you typically have 30 to 60 days to make changes. Contact your plan administrator to find out what counts as a may have access to event under your plan.
Do I need to keep receipts after I am reimbursed?
Yes. Keep receipts for at least three years in case the IRS audits your tax return or your plan administrator asks for documentation. The receipt should show the provider's name, the dates of service, the amount paid, and a description of the care provided.