Dependent Care Account
A flexible spending account for dependent care (DCA or DCFSA) allows you to set aside funds from your paycheck on a pre-tax basis to pay for qualified dependent care expenses while you work, look for work, or attend school full-time.
Simply use your DCA debit card at the point of sale for services, or file a claim for reimbursement. Since the IRS governs this pre-tax benefit, you can only use your FSA funds for IRS-approved dependent care.
- Adult and senior day-care
- Licensed before and after-school programs
- AuPair or nanny for children
- Work-related babysitting, not by a tax-dependent
- Day nursing for dependent adults
- Elder care
- Nursery and preschool
- Child care
- Summer day camp for children
- Not eligible: school tuition & assisted living
Download a printable summary of the DCA to learn more about this tax-free benefit:
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Beginners: Start Here!
Are you taking advantage of your pre-tax savings accounts, such as FSA or HSA? Let’s break it down:
- What are tax-advantaged benefit accounts
- What is an eligible expense
- How much to save
- How they save you money
Check out this video with more info on the DCA.
Answers to your questions
Questions? We have answers! Here are your most frequent DCA questions.
Q: How does the DCA work?
A: Determine how much you need to cover the year's dependent care expenses. We withhold that amount from your paycheck pre-tax in equal installments and deposit it into your DCA.
When you have an eligible expense, submit a claim for reimbursement or use your DCA debit card. Save your receipts; you may be required by the IRS to verify expenses.
To participate, you must enroll within 30 days of your date of eligibility or during annual enrollment.
Q: Is the DCA "use it or lose it"?
A: Yes, the IRS's "use it or lose it" rule requires any unused funds to be forfeited at the end of the plan year's grace period.
Participants have 90 days from the end of the plan year to file claims for the previous year.
Unlike the health FSA, you may not roll over a small, set amount of unused funds from one year to the next.
Q: Who is eligible for coverage?
A: The DCA covers your children ages 12 and under, disabled spouse, elderly parent, or other dependent who is physically or mentally incapable of self-care.
The dependent must primarily live with you and be unable to care for him/herself. A daily facility is eligible. Assisted living is not.
Dependent care expenses must be work-related; necessary for you/your spouse to work, look for work, or attend school full-time.
Q: Can I change my election any time?
A: Yes. Although this is a pre-tax contribution, the IRS does recognize that dependent care needs and expenses may change throughout the year, as long as you do not exceed the maximum allowable contribution.
If your employment ends, you may claim DCA expenses incurred only through the date of your termination. You must submit all claims within 30 days of your termination. Any funds not claimed within that time frame may be forfeited.
Q: When are funds available?
A: The DCA is a "money in, money out" account. Funds are available as soon as they are deducted from your paycheck and deposited into your account, and not before.
You may set up a recurring claim for administrative ease.
Q: What's the annual maximum?
A: The maximum may adjust annually for inflation. For the current maximum, see IRS Publication 969. There is no minimum.
You and your spouse's combined DCA contributions cannot exceed the maximum, even if you file separate tax returns.
Lingering questions? We've got you! Get even more answers here.
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