Hey, parents! Let’s talk about Dependent Care Flexible Spending Accounts, also known as a Dependent Care Assistance Plan (DCAP). I’ll cover contribution limits, dependent requirements, eligible expenses, and more!
A DCAP is an employer-sponsored benefit that allows workers to set aside money before taxes to pay for dependent care while they are working or attending school.
If your employer offers this benefit, it’s available to working adults with:
Here are the current contribution limits:
If you file with a married filing jointly or head of household status on your tax returns, you can set aside up to $5,000 per year.
Those who file their tax returns using a married filing separately status can contribute up to $2,500 per year.
Eligible expenses for DCAP accounts include:
A DCAP is designed to help people pay for the costs of keeping your dependents cared for while you’re working or at school. However, this is limited to tuition and similar type expenses.
You CAN NOT use your DCAP to pay for:
There are a few pieces of information you’ll have to submit to get reimbursed from your DCAP:
Credit card receipts, canceled checks, and balance-forward statements are not acceptable documentation.
Talk to your benefits administrator about how to submit the reimbursement form (email, online, fax, mobile app).
If your child is enrolled in a program with predictable tuition, some benefits administrators offer what is known as a recurring expense form. Your caregiver must verify your tuition total for the period being claimed. Once you submit this form, you should receive reimbursement each pay day (divided up equally) until the end of the claimed recurring service period or until you’ve received your annual election total, whichever comes first.
A DCAP is a use-it-or-lose-it account, and you cannot change your election once the plan year starts (with a few exceptions, such as no longer having an eligible child care expense or a change in the number of your dependents). If you do not claim the entire amount, you cannot get this money back. Be sure to use this year’s receipts to calculate how much you need to put aside for child care for the following year.
See IRS Publication 503 for more information.