Dependent Care Flexible Spending Account
A Dependent Care Flexible Spending Account allows you to set aside pre-tax dollars to pay for dependent care expenses that enable you (and your spouse, if filing jointly) to work or look for work.
Qualifying Persons
Your child under age 13 who lived with you for more than half the year and would qualify as your dependent, or Your spouse who is physically or mentally unable to care for themselves and lived with you for more than half the year, or Another individual who is physically or mentally unable to care for themselves, lived with you for more than half the year, and either: (a) is your dependent, or (b) would be your dependent except they had income above the annual IRS threshold for qualifying relatives (see IRS Publication 503 for the current threshold), filed a joint return, or you could be claimed as a dependent on someone else's return.
Contribution Limits
Contribution limits: The IRS allows you to contribute up to $5,000 per household per calendar year (or $2,500 if married and filing separately).
When can you be reimbursed?
IRS rules require that care must be provided before it can be reimbursed, even if you paid in advance.
For example:
If you pay in full for January's child care on January 1st, you may only be reimbursed for each week of care after it has occurred. You may submit claims weekly, at the end of each week.
Divorced
If you are divorced, only the custodial parent’s expenses are eligible for reimbursement through a Dependent Care Assistance Program (DCAP). The IRS defines the custodial parent as the one with whom the child lived for the greater number of nights during the year. Who claims the tax exemption does not determine DCAP eligibility. If custody is exactly equal (50/50), the parent with the higher adjusted gross income is considered the custodial parent.
What does "unable to care for themselves" mean?
For a person to qualify as unable to care for themselves under DCAP rules, their physical or mental incapacity must be disabling. This includes individuals who cannot dress, clean, or feed themselves, or those who require constant supervision due to mental impairments that could result in harm to themselves or others.