Dependent Care FSA: Save on Daycare, Preschool, Summer Camps, After-School, and Elder Care

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

One of the newer work perks that we took advantage of this year was the Dependent Care Flexible Spending Account (DCFSA). This is separate from the Health Care Flexible Spending Account (HCFSA) and the Health Savings Account (HSA). However, they do work in a similar way in that you can pay for eligible expenses with pre-tax money and thus save money by being exempt from income taxes on that amount. For example, we were able to pay for $5,000 in preschool expenses using your DCFSA in 2018. At a a 30% marginal total tax rate (see below), that was a $1,500 savings.

Eligible expenses for children (under age 13)
The overall idea is to cover childcare while you are working:

  • Nannies, Au pairs, and babysitters
  • Daycare and Nurseries
  • Preschool
  • Before and After School Care Programs. (Non employer-sponsored.)
  • Summer Day Camps

Eligible expenses for adults
The overall idea is to cover care for an adult dependent (spouse, relative) who is physically or mentally incapable of caring for themselves and lives in your home for more than half the year:

  • Adult or Senior day care center
  • In-home custodial caregiver (Non-medical, like eating and bathing assistance)
  • Transportation to/from eligible care (by your care provider)

You should keep detailed supporting documentation and itemized receipts for your HR department and potentially the IRS.

Maximum contribution amounts
The annual contribution limits for 2018 and 2019 are below. (They are not adjusted automatically for inflation.) Note that you can’t exceed your earned income.

  • $5,000 per year if you are married and file a joint tax return or if you file as single or head of household. (If MFJ, one person can get $5,000 when the other does not participate at all.)
  • $2,500 per year if you are married and file a separate tax return. (If MFS, both of you can get $2,500 individually.)

Similar to the Healthcare FSA, these funds must be claimed during the year deducted (plus any grace period) or you will lose the funds. “Use it or lose it”.

Total tax benefit
When you are able to pay with pre-tax money, you are avoiding taxes on:

  • Federal income tax
  • State income tax
  • FICA (Social Security tax)
  • Medicare tax

For 2018, the Social Security tax rate is 6.2% on the first $128,400 wages paid. The Medicare tax rate is 1.45% on the first $200,000 and 2.35% above $200,000. For us in the 22% federal marginal tax rate, that’s a total of 22 + 6.2 + 1.45 = 29.65%. So we’re nearly at a 30% savings even ignoring state income taxes. A 30% total tax savings on $5,000 in childcare expenses is $1,500. This is definitely worth enrolling and submitting a few receipts, even if our claim submission system is a bit slow and clunky.

This is also separate from the Child and Dependent Care Tax Credit. You are not allowed to “double-dip” and claim the same specific expense for both this DCFSA and the tax credit. But if you have enough total expenses, you can get both.

Bottom line. If you pay for childcare or care for a disabled adult dependent, you should check if your employer now offers a Dependent Care Flexible Spending Account (DCFSA). The times to check are when you get a new job, have a new child, change marital status, your spouse loses benefits, or during Open Enrollment. If you pay for full-time care, it is quite likely you can max this out and save some serious money. Just be sure to file those claims on time!

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

User Generated Content Disclosure: Comments and/or responses are not provided or commissioned by any advertiser. Comments and/or responses have not been reviewed, approved or otherwise endorsed by any advertiser. It is not any advertiser's responsibility to ensure all posts and/or questions are answered.


  1. Note that both spouses must have earned income in order to qualify for this. For example, a family with one stay-at-home parent with no earned income cannot use this to pay for their child’s preschool.

    • Yes, that is a good reminder. However, if the unemployed spouse is actively looking for work or a full-time student, then the working spouse can still participate in the DCFSA.

      • This is the kicker for me. My wife is a stay-at-home mom. Otherwise, we’d utilize the heck out of a DCFSA.

        • Frugal, one possible way to utilize this is to have a qualified joint venture with your wife. Generally speaking (I’m not a tax professional), if you have any self-employment, you can split that with her if she’s contributing to the business. With many self-employed people I know, the business includes the whole family whether they intend it to or not, so this is often an accurate assessment of actual contribution, not a stretch to gain some tax benefit. You’ll both file schedule C’s and her self-employed income may then be enough to qualify for the DCFSA.

  2. Watch out for the annual FSA discrimination test, which can disqualify up to 90% of the annual contribution. It is like AMT for the FSA.

    • Well, I wouldn’t call it like the AMT because it’s mainly worried about a few employees taking up all the benefits in small business, not simply having a high income. You could be making $500,000 a year but if you’re working at Microsoft or Google, you’re not classified as a “Highly Compensated Employee”. I would definitely ask your plan administrator if you read that and are concerned, as they should let you know if you are classified as an HCE.

  3. My employer offers this program , but can’t I claim dependent care expense while filing my tax anyways which essentially bring down my taxable salary ?

    • The Child and Dependent Care Tax Credit applies to annual expenses up to $3,000 (for one qualifying individual) or $6,000 (for two or more qualifying individuals). If you have more expenses than this (I do), then the DCFSA will save you even more money.

  4. Brent Pearson says

    If my wife and I weren’t married, would we be able to each contribute $5k? I’m guessing you can’t use an FSA for dependent care if you don’t claim a dependent, but we have two kids, so couldn’t we each take one as a dependent and then get twice the benefit? Yet another way marriage screws you, tax-wise?

  5. Joshua Katt says

    Anyway to pull this off if self employed, sole proprietorship? Thanks

    • Yes, absolutely. Self-employed income counts as income. If filing jointly, see the discussion above about requirements for working spouses.

Speak Your Mind