Dependent Care FSA Limits Get Major Update

Good news for working parents! Starting in 2026, families can set aside up to $7,500 annually in a Dependent Care Flexible Spending Account (FSA) — a big jump from the long-standing $5,000 cap. That’s a 50% boost in tax-free savings to help cover the escalating cost of care.

Learn more about the Dependent Care FSA update and how you can max your benefits below.

Childcare Is Not Cheap

As parents can attest, childcare is no small line item in the typical family budget. Whether you have one kiddo or a whole crew, the cost of care adds up quickly!

• Average annual childcare cost:  $10,000–$15,000 per child
• Range across the U.S.:  $6,000 to $22,000 annually
• In some areas, childcare can eat up 20% of a family’s income

Getting a Dependent Care FSA through your employer is one way to help ease the cost burden.

Families Get Much Needed Relief (Finally!)

After nearly 4 decades of capping DCFSA/DCAP elections to $5,000 annually, Congress raised them and provided much needed relief for working families. Thanks to the passage of H.R. 1 (aka “The One Big Beautiful Bill Act”), the annual contribution limit is increasing to $7,500 starting in 2026.

The DCFSA benefit, sometimes called Dependent Care Assistance Plans (DCAP), receives a 50% increase in the annual contribution limit, letting you set aside pre-tax dollars to pay for eligible care expenses. That means more money in your pocket—and less stress when the bills roll in.

Here’s how the Dependent Care FSA update stacks up:

When Does the New Limit Start?

The new annual limit begins for employer-sponsored plans that start after December 31, 2025. If your employer’s plan starts January 1, you can take advantage of the new rates.

What Can You Use DCAP For?

DCAP funds can be used for care expenses while you (and/or your spouse) are working, looking for work, or attending school. Eligible dependents include:

• Children under age 13
• A spouse or other dependent 13+ who can’t care for themselves

Covered expenses include:

• Before- and after-school programs
• Daycare and preschool
• Day camps (not overnight)
• Adult day care for qualifying dependents

Planning for Next Year

To get the most out of your DCAP:

1. Track your expenses: Keep your receipts and total them up at the end of the year. If you’re already using a DCFSA/DCAP, you may be able to run a report from your benefits portal that tracks every expense you have claimed for reimbursement.
2. Estimate your needs: Use past spending to decide how much to set aside for next year. If you’re expecting a new baby or your children are aging out, be sure to factor that in.
3. Plan early: In most cases, you’ll have to choose your contribution level during open enrollment. You can only update your elections mid-year if you have a qualifying event. 

The Takeaway

This increase is a big win for working families. With more tax-free dollars to put toward care, you can breathe a little easier … and you just might have some extra change to splurge on a cup of coffee after the morning drop-off!