Is a Dependent Care Flexible Savings Account (FSA) Right For Your Family?
This post was originally created and published by Procare Solutions on November 2, 2022. You can find the original piece here. It is reprinted here with permission from Procare.
If your employer gives you the option of setting money aside in a dependent care flexible savings account, it’s worth taking a closer look to see how it could save your family money.
Here’s a quick overview to help you decide if such an account is right for you!
What Is A Dependent Care FSA?
A dependent care flexible spending account (FSA) is a pre-tax benefit account that is used to pay for eligible dependent care services such as preschool, before and after school programs, day camps, as well as child or adult daycare.
Money is deducted from your paycheck and you withdraw it to pay for care of those who depend on you.
For child care, the money from the dependent care FSA can be used for the care of those 13 years old and younger.
Expenses typically not covered include activity fees, field trips, diapers, tutoring and meals.
And tuition for kindergarten or private schools is not a qualifying expense either. That’s because the IRS says that is an educational expense, rather than a child care expense.
What Paperwork Do I Need to Submit?
Keep your receipts! Keep your receipts! Keep your receipts!
You’ll typically be asked to attach an itemized receipt each time you make a withdrawal from your dependent care FSA. Information that is required includes the tax ID of your daycare, the tuition amount, the names of your children and dates the care was provided.
You’ll most likely be asked to submit this information online for reimbursement.
Credit card receipts, canceled checks and balance forward statements won’t cut it for acceptable documentation.
How Much Can I Contribute?
For 2023, the maximum amount that can be contributed to a dependent care account remains at $2,500 for those who are married and filing separately, and at $5,000 for those who single or married filing jointly.
Can I Change How Much I Contribute Outside Open Enrollment?
This is a good question to ask your human resources department. Typically, you cannot change your FSA contribution midyear. But you might be able to, if you have a “qualifying event” such as the birth of a new child.
Don’t hesitate to reach out to your benefits coordinator to make sure you’re allocating the amount of money that best suits the needs of your family.