What Are Dependent Care FSA-Eligible Expenses?
Taking care of your family is a fulfilling responsibility, but it can also cause financial pressure when the costs of care start to mount. The good news is that Dependent Care Accounts (DCAs) may help provide coverage for everyday dependent daycare expenses.
Understanding DCA Expenses
A DCA is a type of Flexible Spending Account (FSA) that allows employees to set aside pre-tax contributions specific for dependent care expenses. DCAs are designed to help pay for the daycare expenses of qualifying individuals while an employee and their spouse (if married) work, look for work, or attend school full-time. Keep in mind the expenses should be employment-related which means without the care, you would not be able to be effectively employed. Expenses may also be eligible when a spouse or qualifying individual is mentally or physically incapable of self-care.
DCA Eligible Expenses
Common DCA eligible expenses include:
- Daycare and Preschool: Eligible expenses include the fees paid to a licensed facility or an in-home provider.
- Before- and After-School Programs: This includes programs that provide care and supervision during non-school hours.
- Summer Camps: The cost of day camps, commonly used during major school breaks, is an eligible DCA expense, as long as the primary purpose is to provide care while the parent(s) works. Transportation costs when transportation is provided by the camp or daycare may also be eligible.
- Nanny or Babysitter: Funds may cover the cost if you hire a nanny or babysitter to care for your dependent. It's important to note that the provider must be over 19 years old and not your dependent. Only costs associated with care while the parents are working are eligible. Also, costs for items unrelated to care such as music lessons or tutoring are not eligible.
- Elder Care: If you have elderly parents or a spouse incapable of self-care, you may be able to use your DCA funds to cover the expenses for their care in a nursing home, adult daycare program, assisted living facility, or for in-home care. (Note: A spouse or elderly parents who are incapable of self-care must be considered qualifying individuals which would require them to live in the same main home for more than half the year. In addition, they must spend eight hours or more in your home per day for the elder care outside of the home to be an eligible expense.)
Learn more about DCA-eligible expenses >
Tips for Maximizing Your DCA Savings
- Plan ahead by taking the time to estimate your eligible expenses for the year. This will help you determine how much to contribute to your account during open enrollment.
- Keep receipts and records of all DCA expenses. These are required when submitting your eligible claims.
- Check your partner's benefits and consider coordinating your contributions to maximize your combined dependent expenses. The maximum exclusion under a DCA for married individuals filing a joint return or for an unmarried parent is $5,000. Married individuals filing separately are subject to a lower maximum exclusion of $2,500 annually.
- Familiarize yourself with your specific DCA rules and guidelines to understand your plan's rules and guidelines. This will ensure that you are aware of any limitations or restrictions regarding eligible expenses.
How to Access Your Funds
You will incur care expenses as normal but save all documentation and receipts. To submit a claim, you will need to provide specific information, including dates of service, who received the care, who provided the care, and the amount charged. Reimbursement payments can be received via direct deposit, check, or other methods specified by your employer's DCA plan. Read more about DCA processes in our blog, “The Basics and Benefits of a Dependent Care Account (DCA).”
From daycare to summer camps and even elder care, utilizing your eligible DCA expenses can reduce your out-of-pocket costs for dependent care with less financial stress. For more guidance and support, visit our DCA Support Page.
This information is general in nature and should not be considered financial, legal, or tax advice. Consult an attorney or a tax professional regarding your specific situation.
This blog is up to date as of February 2025 and has not been updated for changes in the law, administration or current events.