What a Dependent Care FSA Covers

A Dependent Care Flexible Spending Account (FSA) is a workplace account where you set aside pre-tax money to pay for childcare or adult dependent care expenses. 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 costs you actually paid.

Dependent Care FSAs cover the cost of care for children under age 13, or for an adult dependent (spouse, parent, or other relative) who cannot care for themselves and lives with you. The care must allow you to work or look for work. Common covered expenses include daycare centers, in-home babysitters, preschool, after-school programs, and adult day care facilities.

The account does not cover school tuition for kindergarten and above, overnight camps, or care provided by a spouse or a child under age 19 who is also your dependent. It also does not cover food, transportation, or clothing — only the direct cost of supervision and care.

Key Takeaways

  • You contribute pre-tax money through payroll deduction, which reduces the income tax and Social Security tax you owe that year.
  • The annual contribution limit is set by the IRS and changes each year; for 2024 it is $5,300 for most workers, but your employer may set a lower limit.
  • You must submit receipts or invoices to your FSA plan administrator to be reimbursed, and you cannot carry unused money forward to the next year.
  • You can only enroll during your employer's open enrollment period or within 30 to 60 days of a may have access to life event such as birth, adoption, or change in childcare provider.
  • If you do not use the money by the end of the plan year, you lose it — this is called the "use-it-or-lose-it" rule.

How Much You Can Contribute and How It Saves Money

The IRS sets a maximum annual contribution limit for Dependent Care FSAs. For 2024, the limit is $5,300 per household per year. Your employer may choose to set a lower limit, so check your plan documents. You decide how much to contribute during open enrollment, and that amount is divided equally across your paychecks for the year.

The money you contribute is deducted from your gross pay before federal income tax, Social Security tax, and Medicare tax are calculated. This means you pay less in taxes overall. For example, if you contribute $3,000 to a Dependent Care FSA and your combined federal, state, and payroll tax rate is 25 percent, you save approximately $750 in taxes that year. The exact savings depend on your tax bracket and state tax rate.

You do not pay income tax on the money you contribute or on the reimbursements you receive from the account. However, you cannot deduct dependent care expenses again on your tax return if you have already paid for them with FSA money.

How to Submit Receipts and Get Reimbursed

After you pay a childcare or dependent care provider out of your own pocket, you submit a claim to your FSA plan administrator to be reimbursed. Most plan administrators now offer an online portal or mobile app where you can upload receipts and request reimbursement. Some still accept paper forms and receipts by mail.

You will need to provide an invoice or receipt showing the provider's name, the dates of care, the amount paid, and what type of care was provided. If your provider is a daycare center or agency, they usually issue a receipt automatically. If you pay an individual babysitter or nanny, ask them for a written receipt each time they work, or keep a log with dates and amounts paid.

Reimbursement typically takes one to two weeks after the plan administrator receives and approves your claim. Some plans offer a debit card linked to your FSA account, which lets you pay the provider directly without submitting receipts afterward — though you may still need to provide proof of the expense if the plan audits your account.

The Use-It-or-Lose-It Rule and How to Avoid Losing Money

Any money left in your Dependent Care FSA at the end of the plan year is forfeited. You cannot carry it forward to the next year, and you cannot get a refund. This is called the "use-it-or-lose-it" rule, and it is a federal requirement for FSAs. Some employers offer a grace period of up to 2.5 months into the next year to submit claims for expenses incurred in the prior year, but the money itself does not roll over.

To avoid losing money, estimate your childcare costs carefully before you enroll. Add up what you paid for care in the previous year, or calculate what you expect to pay based on your current provider's rates and your work schedule. Be conservative — it is better to contribute less and have money left over than to contribute too much and forfeit the remainder.

If your childcare costs change during the year — for example, your child starts school and you need less care — you can request a change to your contribution amount if your employer allows it. Most employers permit changes only during open enrollment or after a may have access to life event, such as a change in your provider's rates or a change in your work schedule.

When You Can Enroll and What Counts as a Life Event

You can enroll in a Dependent Care FSA only during your employer's open enrollment period, which usually happens once per year. Open enrollment typically lasts 30 to 60 days, and your employer will notify you of the dates. If you miss open enrollment, you cannot enroll until the next year.

You can also enroll outside of open enrollment if you experience a may have access to life event. Common may have access to events include the birth or adoption of a child, a significant change in your childcare costs or provider, a change in your spouse's employment status, or a change in your dependent care needs. You usually have 30 to 60 days from the date of the event to enroll or make changes to your account.

If you are newly hired, your employer may allow you to enroll within 30 days of your start date, even if it is not open enrollment. Check with your human resources or benefits department to confirm the enrollment window and what documentation you need to prove a may have access to event.

Dependent Care FSA vs. Dependent Care Tax Credit

You cannot use both a Dependent Care FSA and the Dependent Care Tax Credit for the same expenses in the same year. You must choose one or the other. The Dependent Care Tax Credit is a tax deduction you claim on your federal tax return; it covers up to $3,000 in childcare expenses per year and reduces your tax bill by a percentage of that amount (the percentage depends on your income).

For most workers, a Dependent Care FSA saves more money in taxes than the tax credit would. However, if your income is very low, or if your childcare costs are low, the tax credit might be the better option. You can also use the FSA to cover expenses above $3,000 and claim the tax credit on the first $3,000 — but the IRS will reduce your tax credit by the amount you paid with pre-tax FSA money.

Speak with a tax professional or your benefits administrator if you are unsure which option is better for your situation. Your employer's benefits guide should also explain how the FSA interacts with the tax credit under your specific plan.

What Happens to Your FSA If You Leave Your Job

If you leave your job, you lose access to your Dependent Care FSA account. Any money remaining in the account is forfeited — you cannot take it with you or transfer it to another account. You can, however, continue to submit claims for expenses you incurred while you were employed, as long as you submit them within the deadline set by your former employer's plan (usually 30 to 90 days after you leave).

If you move to a new job that offers a Dependent Care FSA, you can enroll in the new plan during your new employer's open enrollment or within 30 days of your hire date. The new account is separate from your old one, and you start with a new contribution limit for the new plan year.

If you are between jobs or your new employer does not offer an FSA, you may be able to continue your old FSA coverage through COBRA (Consolidated Omnibus Budget Reconciliation Act), though this is rare for FSAs and you would have to pay the full premium yourself, including the employer's share. Ask your former employer's benefits department whether COBRA is available for FSAs.

Frequently Asked Questions

Can I use my Dependent Care FSA to pay for summer camp?

Overnight camps and camps that provide primarily recreational or educational activities are not covered. However, day camps that provide childcare while you work may be covered if the camp's primary purpose is supervision and care. Contact your plan administrator with details about the camp's schedule and activities to confirm whether it qualifies.

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

Any unused money is forfeited under the use-it-or-lose-it rule. Some employers offer a grace period of up to 2.5 months into the next year to submit claims for prior-year expenses, but the money itself does not carry over. Plan your contribution carefully based on your expected childcare costs.

Can my spouse and I both contribute to a Dependent Care FSA?

No. The household contribution limit of $5,300 per year applies to both spouses combined, not to each person separately. You and your spouse must decide together how much to contribute and which employer's plan to use, or split the limit between two plans if both employers offer one.

Do I need to report my Dependent Care FSA on my tax return?

No. Your employer reports your FSA contributions to the IRS, and you do not need to claim them on your tax return. However, if you also use the Dependent Care Tax Credit, you must reduce the credit by the amount you paid with pre-tax FSA money.

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

Only if your employer allows changes outside of open enrollment and you have a may have access to life event, such as a change in your provider's rates, your child starting school, or a change in your work schedule. Most employers require changes to happen during open enrollment only. Check your plan documents or ask your benefits department.