Dependent Care FSA
How Much Can Employees Save With a Dependent Care FSA?
A Dependent Care FSA is a pre-tax account that lets employees set aside funds specifically for eligible child or dependent care expenses—up to $5,000 per year for most filers—separate from a standard healthcare FSA.
Dependent Care FSAs cover costs like daycare, preschool, and before/after-school care, but only to the extent the care enables the employee (and spouse) to work. The contribution limit is separate from the healthcare FSA limit.
Funds are generally subject to a use-it-or-lose-it rule tied to the plan year. Employees must submit documentation to be reimbursed, and reimbursement is limited to expenses already incurred.
Dependent Care FSA Key Facts and Contribution Limits:
- Covers eligible child/dependent care costs that enable the employee (and spouse) to work.
- Separate IRS contribution limit from the standard healthcare FSA.
- Generally subject to use-it-or-lose-it rules, with limited carryover/grace period options in some plans.
- Requires documentation for reimbursement of already-incurred expenses.
Frequently Asked Questions
Can a Dependent Care FSA be used for any childcare expense?
No—it must enable the employee (and spouse) to work or look for work.
Is the limit the same as the healthcare FSA limit?
No—they’re separate limits set independently by the IRS.
Can funds be used to prepay for future care?
No—reimbursement is limited to care already provided.
Can funds be used to prepay for future care?
No—reimbursement is limited to care already provided.
Can both spouses use a Dependent Care FSA if both work?
Yes, but the combined household limit still applies—the $7,500 annual cap covers the family total.
What happens to Dependent Care FSA funds if an employee’s child ages out mid-year?
Expenses incurred before the child turns 13 (or becomes otherwise ineligible) remain reimbursable, but costs after that point no longer qualify.