Workplace Benefits
What Is a Dependent Care FSA (DC-FSA)?
Whether it’s day care for children or support for elderly family members, we want to ensure those who depend on us have the care they need.
A dependent care flexible spending account (DC-FSA) can help you save on care expenses for your family members because contributions help reduce your taxable income and aren’t subject to payroll taxes. Let’s take a closer look at dependent care FSAs, how they work, and how you might be able to benefit from this type of account.
How does a dependent care FSA work?
A dependent care FSA works by letting you set aside pre-tax dollars to pay for eligible dependent care services, such as day care. DC-FSA funds can typically only be used to care for children who are under 13 years old or for adults who live with you and are physically or mentally incapable of caring for themselves.
You’re only able to enroll in a DC-FSA if your workplace includes it as part of your employee benefits package. If that’s the case, you can sign up during open enrollment or after a qualifying life event (QLE). You just have to decide how much to contribute, while following contribution limits set by the government.
What are dependent care FSA-eligible expenses?
Here are a few examples of typical dependent care FSA-eligible expenses:
- Day care, preschool, and nursery school
- Summer day camps
- Some approved nanny services
- Before- and after-school care
Keep in mind that DC-FSA expenses must be work-related to be eligible for reimbursement. This will generally mean that both of the following need to be true:1
- Expenses allow you or your spouse to work or look for work.
- Expenses are used to help care for a qualifying person.
What is the 2024 dependent care FSA contribution limit?
You can contribute up to $5,000 in 2024 if you’re married and file jointly with your spouse, or if you’re a single caretaker for a dependent. Married applicants who file separately are limited to a maximum of $2,500 in annual contributions.3
Funds for your DC-FSA will be withheld from your paycheck. To access your money, you can typically pay dependent care expenses with a debit card connected to your account, or you can pay providers directly through your online portal. You may also be able to submit receipts and file a claim for reimbursement. Be sure to check with your specific provider to determine how you can access your funds.
What’s the process for filing a dependent care reimbursement claim?
When filing a claim, receipts or other proof of payment will usually need to be included. Receipts generally have the following information:
- The name of the child or adult who received the care
- The name of the provider who delivered the service
- The date the service was provided
- A detailed description of the type of service provided
- The total amount paid for the service
What happens if I don’t use all my account funds during the year?
Typically, funds aren’t allowed to roll over year-to-year, and it's recommended you use your savings before the year is over.
However, the Internal Revenue Service (IRS) offers some flexibility for rolling over unused FSA funds in the form of a grace period.2 Generally, this grace period gives employees up to 2.5 months into the next calendar year to spend their DC-FSA funds.
Not all employers allow this grace period, so be sure to check with your FSA provider to better understand how these policies apply to your account.
What happens if I change jobs, lose my job, or retire?
To be eligible for reimbursement, your expenses will need to be incurred before your termination date or final day on the job. Following this date, you’ll still be able to apply for reimbursement until the account’s funds are depleted.
Your employer might institute a claim period that restricts reimbursement after you’ve started working for a new employer. Before your last day at work, be sure to ask your employer about their FSA reimbursement period policy.
Healthcare FSA vs. dependent care FSA
Like a dependent care FSA, a healthcare FSA (HFSA) is an employer-sponsored account that lets employees set aside pre-tax money from their salary to help pay for eligible expenses.2 However, the two accounts have some key differences, including:
- Eligible expenses: A DC-FSA helps cover costs associated with child and adult care services. A general health FSA helps cover eligible medical expenses, like deductibles and copayments or prescription medications.
- Rollover and grace periods: DC-FSA funds don’t typically roll over, but depending on your plan, you may have up to a 2.5-month grace period before the money is forfeited. A healthcare FSA may offer a grace period or a rollover.
- Contribution limits: In 2024, you can contribute up to $5,000 per household or $2,500 for married couples filing separately to a DC-FSA.3 The 2024 FSA limits are $3,200 per FSA.3
- Qualifying individuals: DC-FSAs are for dependents who require care, typically children under the age of 13 or adults who can’t care for themselves. Healthcare FSAs can cover the account holder, their spouse, and eligible dependents.3
Bottom line: Saving money on dependent care
Dependent care FSAs can be an essential benefit for caretakers looking to save on their monthly bills. By setting aside pre-tax dollars from your paycheck, these accounts can help you better manage your finances, while reducing your taxable income.
If your employer offers DC-FSAs, be sure to talk to your HR department and FSA provider to get a better understanding of your plan’s enrollment process, contribution limits, and eligible expenses.
Learn about MetLife Health Savings & Spending Accounts
1 “Publication 503 (2022), Child and Dependent Care Expenses,” IRS
2 “Publication 969 (2022), Health Savings Accounts and Other Tax-Favored Health Plans,” IRS
3 “IRS provides tax inflation adjustments for tax year 2024,” IRS, 2023
Nothing in these materials is intended to be, nor should be construed as, advice or a recommendation for a particular situation or individual. Participants should consult with their own advisors for such advice. Federal and state laws and regulations are subject to change.