A dependent care flexible spending account, or FSA, allows you to deduct a portion of your paycheck before taxes are taken out to pay for qualified dependent care expenses so that you can work or look for work.
Your employer plan can allow you to contribute up to $5,000 each year to a dependent care FSA, according to IRS rules. However, individual workplaces may set lower limits.
You can use your dependent care FSA to pay for care for children under age 13 that you claim as dependents as well as adults or other relatives that are incapable of caring for themselves, if you provide more than 50% of their support.
You cannot use your dependent care FSA to reimburse another qualified dependent (such as a spouse who does not work) for care or your child under age 19.
Typically, you cannot change your contribution mid-year. However, if you experience a qualifying event, such as the birth of a new child, or if your child care provider significantly increases their rates, you may be eligible to adjust your contribution. Talk to your benefits provider to confirm.
No, you will only have access to dependent care funds that have already been deducted from your paycheck.
If you don’t use all of the money in your dependent care FSA by the end of your plan year, the money is forfeited. The best way to avoid this situation is to carefully plan for your expenses and make adjustments to your account if you experience any qualifying events.
“In the past two years I have had to have significant dental work done to correct bone and tooth loss that was occurring in my upper jaw. Since my dental plan was good, but not unlimited, I loaded up my FSA with the maximum amount, and I am really glad I did because I had more than $3,000 in dental fees beyond what my plan covered. ”
Annual Savings: $2000