Dependent Care Account

Participating in a dependent care flexible spending account is like receiving a 30% discount from a care provider. Encourage employees to enroll today to start saving.

What is a dependent care flexible spending account (DCA)?

A DCA is a flexible spending account that allows employees to set aside pre-tax dollars for dependent care expenses. Since DCA contributions are deducted from employees paychecks pre-tax, their taxable income is reduced. Participants enjoy a 30% average tax savings on their annual DCA contributions.

Why enroll in a DCA?

Child and dependent care is a large expense for many American families. Millions of people rely on childcare to be able to work, while others are responsible for older parents or disabled family members. If an employee pays for care of dependents in order to work, they'll want to take advantage of the savings this plan offers. Money contributed to a DCA is free from federal income, Social Security, and Medicare taxes and remains tax-free when it is spent.

Sample Employee Savings:

* For illustrative purposes only. Based on a typical tax situation of 15% federal tax, 7.65% FICA, and 5% state income tax. Other tax situations may be different. Consult a tax advisor.

Qualifying Dependents

  • A qualifying child under the age of 13, who shares the same residence with the employee, or
  • A spouse or qualifying child or qualifying relative who is physically or mentally unable to care for him/herself who shares the same residence with the employee and has income less than the Federal exemption amount.

Annual Contribution Limits

The IRS limits annual contributions to $5,000 on income tax returns for single or married filing jointly, and $2,500 for married filing separately.

Eligible Expenses

DCA funds cover care costs for eligible dependents while at work:

  • Before school or after school care (other than tuition)
  • Custodial care for dependent adults
  • Licensed day care centers
  • Nursery schools or pre-schools
  • Placement fees for a provider, such as an au pair
  • Day camp, nursery school, or a private sitter
  • Late pick-up fees
  • Summer or holiday day camps

Ineligible Expenses

These items are never eligible for tax-free purchase with DCA funds:

  • Expenses for children 13 and older
  • Care provided by a relative that lives in the household or dependents under are 19
  • Educational expenses including kindergarten or private school tuition fees
  • Amounts paid for food, clothing, sports lessons, field trips, and entertainment
  • Care for dependent while sick employee stays home
  • Overnight camp expenses
  • Registration fees
  • Transportation expenses
  • Late payment fees
  • Advanced payments