What can you spend dependent care FSA on?
The Dependent Care Flexible Spending Account (FSA) is a valuable tool for employees who have dependent care needs. This account allows you to set aside pre-tax dollars to pay for certain dependent care expenses. But what exactly can you spend your dependent care FSA on? Let’s explore the details.
Eligible Dependent Care Expenses
The primary purpose of a dependent care FSA is to cover the costs of care for eligible dependents while you are working or looking for work. Here are some of the common eligible dependent care expenses you can pay for with your FSA:
1. Daycare centers: You can use your FSA to pay for care in a licensed daycare center for your children under the age of 13 or for your disabled spouse or dependent adult child who is unable to care for themselves.
2. In-home care: If you hire a caregiver to provide care for your dependent in your home, you can use your FSA to cover the costs.
3. Before- and after-school programs: These programs can be an excellent option for working parents who need care for their children before or after school hours.
4. Summer day camps: You can use your FSA to pay for summer day camp programs for your children, as long as they are not religious or overnight camps.
5. Before- and after-school programs: These programs can be an excellent option for working parents who need care for their children before or after school hours.
6. Before- and after-school programs: These programs can be an excellent option for working parents who need care for their children before or after school hours.
It’s important to note that not all dependent care services are eligible for FSA reimbursement. For example, you cannot use your FSA to pay for care provided by a family member, such as a grandparent or a sibling, or for services provided by a personal care service like a housekeeper or a gardener.
Understanding the Limits
While the dependent care FSA can help alleviate the financial burden of dependent care, it’s essential to understand the limits and restrictions associated with this account. Here are some key points to keep in mind:
1. Contribution limits: The IRS sets an annual contribution limit for dependent care FSAs. For 2021, the limit is $5,000 for married individuals filing jointly and $2,500 for married individuals filing separately or single individuals.
2. Use it or lose it: Unlike health care FSAs, dependent care FSAs have a “use it or lose it” rule. You must use the funds in your account by the end of the plan year or risk losing any unused funds.
3. Tax implications: The funds you contribute to your dependent care FSA are not taxed, and the expenses you pay for with the funds are also not taxed. This can result in significant tax savings for eligible employees.
In conclusion, the dependent care FSA is a valuable resource for employees who need to cover dependent care expenses. By understanding what you can spend your dependent care FSA on and the associated limits, you can make the most of this tax-advantaged account and ease the financial strain of dependent care.
