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Dependent Care Accounts

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    • Dependent Care Flexible Spending Account

    Take charge of your dependent care expenses and save money with a Dependent Care Flexible Spending Account (DCFSA). By contributing pre-tax earnings to a DCFSA, you can maximize your savings on eligible dependent care services while reducing your taxable income.

    The Dependent Care FSA is specifically designed to help you cover qualifying expenses for the care of eligible dependents, including daycare, preschool, before- and after-school programs, summer day camps, and adult day care services. With a DCFSA, you can use pre-tax dollars to pay for these expenses, making care more affordable for you and your family.

    By setting aside funds before taxes are deducted from your paycheck, you can lower your overall tax liability and keep more of your hard-earned money. Don’t miss the opportunity to better manage your dependent care expenses and maximize your savings with a DCFSA.

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    What is a Dependent Care Flexible Spending Account?

    A Dependent Care Flexible Spending Account is designed to provide financial support to parents who work full-time and must find care for a dependent child or adult while they are working. Participants can set aside pre-tax funds from their paycheck for eligible expenses.

    By contributing to a DCFSA, employees reduce their taxable income, which can result in significant tax savings. Eligible expenses may include childcare services, nursery school, preschool, before- and after-school care, summer day camps, and adult day care for qualifying dependents.

    Unlike a Healthcare FSA, a DCFSA can only be used for qualified dependent care expenses and cannot be used for medical costs. DCFSA funds are generally subject to the “use-it-or-lose-it” rule, meaning any unused funds may be forfeited at the end of the plan year unless the employer’s plan includes a grace period or other allowable provisions.

    A DCFSA can be a valuable benefit for working parents and caregivers looking to reduce the cost of caring for loved ones while taking advantage of meaningful tax savings.

    What Expenses Can an Dependent Care Flexible Spending Account Cover?

    DCA expenses require that expenditures be “work related” — those incurred while the member or their spouse were working or looking for work. A Dependent Care FSA plan will cover:

    • Child and adult daycare
    • Nanny and babysitting expenses
    • Elderly care
    • Preschool
    • Summer day camp
    • Before- and after-school care

    The Internal Revenue Service (IRS) determines the maximum amounts members can contribute to their DCA Plan.

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    Advantages of a Dependent Care Flexible Spending Account

    Employers can offer employees who have dependents a way to contribute funds for their care while also saving them money. Offering this account type to employees is essentially giving them a 30% discount on their care expenses. Participants will not have to pay Medicare, Social Security or federal income taxes on their DCA contributions, and as a tax-favored vehicle, this money will stay tax-free when used. A DCA also helps participants save money because they will have a larger “take-home” paycheck.

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    Features of a Dependent Care Flexible Spending Account with The Difference Card

    The Difference Card has simplified benefit solutions by making access to the funds in a DCA easy for members. Participants can use their Difference Card to access their funds by swiping the card or filing for reimbursement. Members can spend up to the amount taken out of their paychecks.

    Contribution limits are decided by the IRS and are adjusted every year to account for inflation.

    The IRS uses the average chained Consumer Price Index (C-CPI-U) to evaluate inflation and make adjustments every year – usually in the Fall with the most recent limits being announced in October. 

    To see the most recent DCFSA contribution limits, go here.

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