Dependent Care FSA Toolkit
Limits
To participate, determine the amount you want to deduct from your paycheck before taxes. The money is deposited in an account. The maximum amount you can elect to deposit into your Dependent Care FSA depends on your federal tax filing status and your annual income. Use the following chart to help you select your Annual Election maximum:
If you are . . . . and your IRS tax filing status is . . . . . . and your earned income is . . . . . . and your spouse's earned income is . . . . . . then your maximum is . . .
single single greater than $5,000 N/A $5,000
less than $5,000 N/A your earned income
married married filing jointly greater than $5,000 greater than $5,000 $5,000
less than $5,000 your spouse's earned income
less than $5,000 greater than $5,000 your earned income
married filing separately greater than $2,500 N/A $2,500
less than $2,500 N/A your earned income

It is important to note that the maximum for the Dependent Care FSA is a "family maximum." Therefore, if your spouse had this same Plan available at his/her employer, you would combine the amount he/she elected with your election. Your combined election could not be higher than the maximum that pertains to you in the chart (above).

Limits for 2019
Maximum Contribution: $5,000 Maximum Contribution if Married Filing Separately: $2,500

FAQs

Who is an eligible dependent?
You can use the Dependent Care FSA for expenses incurred for:
  • A dependent who is age twelve (12) or younger for whom you claim a dependency exemption on your income tax return; or
  • Your dependent [such as a child who is over age twelve (12), your parent, your spouse's parent, or any other qualified individual] who is physically or mentally incapable of caring for him/herself, and for whom you can claim a dependency exemption (or could claim an exemption except the person has gross income that exceeds the exemption amount); or
  • Your spouse who is physically or mentally unable to care for him/herself.
  • Special Rule for Child of a Divorced or Separated Custodial Parent - Under certain circumstances, the child of a divorced or separated employee who has custody of the child is treated as a qualified child of the employee, even though only the ex-spouse may claim the dependency exemption. For purposes of this Plan, only the parent with custody may use the Dependent Care FSA for his/her eligible expenses.
What does "gainfully employed" mean?
We have mentioned in this material that you and your legal spouse (if applicable) must be gainfully employed for your expenses to be eligible for reimbursement from your Dependent Care FSA. Gainfully employed means that you are working and earning an income (i.e., not doing volunteer work). You are not considered gainfully employed during paid vacation time or sick days. Gainful employment is determined on a daily basis.
Since you are an employee of your company, you are gainfully employed. If you have a legal spouse, then your spouse would also need to be gainfully employed for your expenses to be eligible. Other definitions of gainful employment include people who are:
  • Unemployed but actively looking for work; or
  • Self-employed; or
  • Physically/mentally not capable of self-care; or
  • Full-time students. A person is a full-time student if he/she is enrolled at and attends a school for the number of hours or classes that the school considers full time. He/she must have been a student for some part of each of 5 calendar months during the year. (The months need not be consecutive.) If he/she is attending school only at night, he/she is not a full-time student. However, as part of his/her full-time course of study, he/she may attend some night classes. The term "school" includes elementary schools, junior and senior high schools, colleges, universities, technical, trade, and mechanical schools. It does not include on-the-job training courses or correspondence schools.
What are eligible expenses for the Dependent Care FSA?
The expenses which are eligible for reimbursement must have been incurred during the Plan Year to enable you and your legal spouse (if applicable) to remain gainfully employed. They include the following costs:
  • The actual care of the dependent in your home. In addition, care provided outside your home is eligible if the dependent regularly spends at least eight (8) hours a day in your home.
  • Incidental household services, such as those provided by a maid, cook, housekeeper, or babysitter if the services are related to the care of an eligible dependent as well as to run the home.
  • Preschool tuition. Generally, care does not include food or schooling/tuition expenses. However, if these items are included as part of the total dependent care, and if they are incidental to and cannot be separated from the total cost, you may include the total cost.
What expenses are not eligible for the Dependent Care FSA?
Some examples of ineligible expenses include the following costs:
  • Schooling for a child in kindergarten or above.
  • Expenses for sending your child to an overnight camp.
  • Babysitter while you go to the movies or out to eat.
What are some other important IRS regulations?
It is important to remember the following IRS rules when considering this account:
  • You cannot be reimbursed for dependent care expenses that were paid to (1) one of your dependents, (2) your spouse, or (3) one of your children who is under the age of nineteen (19).
  • In the event you use a day care center that cares for more than six (6) children, the center must be licensed.
  • You must provide the day care provider's Social Security Number/Employer Identification Number (EIN) on Form 2441 when you file your taxes.
Can I still take the Federal Income Tax credit for dependent care expenses?
The IRS allows you to take a tax credit for your dependent care expenses. The tax credit may provide you with a greater benefit than the Dependent Care FSA if you are in a lower tax bracket. To determine whether the tax credit or the Dependent Care FSA is best for you, you will need to review your individual tax circumstances. You cannot use the same expenses for both the tax credit and the Dependent Care FSA, however you may be able to coordinate the federal dependent care tax credit with participation in the Dependent Care FSA for expenses not reimbursed through the Dependent Care Flex Plan.
The tax savings calculator on this Toolkit can help you more closely estimate your individual tax savings from a Dependent Care FSA. Actual savings will depend on many factors including your household income and tax filing status. In some cases, the federal dependent care tax credit may provide a greater benefit than the Dependent Care FSA. Therefore, you will need to determine what is best for you based on your income and tax situation.
For more information, please refer to IRS Form 2441(Child and Dependent Care expenses) available directly from the IRS and available at www.irs.gov. You may also wish to consult a tax advisor.
What happens if I terminate my employment or my position is reduced to part-time during the year?
In some cases, you can still be reimbursed for expenses you incur after your termination/reduction in hours date until the end of the plan year. In others, you can only submit claims for expenses incurred before your termination date. See your Summary Plan Description.