For 2025, you should generally contribute up to $5,000 per household ($2,500 if married filing separately) to a Dependent Care FSA to pay for qualifying child/dependent care with pre-tax dollars. For 2026, this limit increases to $7,500 ($3,750 married filing separately).
You can contribute up to a maximum of: $3,750.00 per year if you are married and file a separate tax return * $7,500.00 per year if you are married and file a joint tax return or if you file as single or head of household **
Key Differences Between Dependent Care FSAs and Tax Credits
A dependent care FSA may be better for employees who can access it because of the pre-tax deductions which can help reduce the employees' income, Social Security, and Medicare taxes. Plus, it may save other types of taxes.
Get your estimated total health care expenses for the year. You should elect to contribute the lesser of your estimated health costs or your plan's contribution maximum to your FSA. See a breakdown of how much will be deducted from each paycheck.
The current dependent care FSA limit of $5,000 (or $2,500 for married couples filing separately) has been in place since 1986 (excluding certain temporary adjustments), so this increase has been a long time coming.
How do I save money with a dependent care FSA? With an FSA, you save approximately 30%* on your eligible expenses, making a $1,000 expense cost you about $700. You get these savings because the contributions you make to your FSA are exempt from Federal, State, and FICA payroll taxes.
Both Employee and Spouse Must Be Working to Have Eligible Dependent Care FSA Expenses. Employees' dependent care expenses are eligible for reimbursement under the dependent care FSA only if the expenses are “employment-related,” which means they enable the employee and spouse to be gainfully employed.
Be mindful of deadlines and plan your spending accordingly. Overestimating Your Contribution: Contributing too much to your FSA can be risky. If you don't spend all the money you've set aside, you'll lose it. Estimate your annual healthcare expenses carefully to avoid over-contributing.
“Maxing out your contributions is only a good idea if you know you'll spend that much or more on medical bills during the year,” says Melanie Musson.
If you're due for a checkup, get in before the end of your plan year and use your FSA funds to cover eligible costs. FSA funds cover acupuncture appointments and many types of chiropractic care. With chiropractic visits, only adjustments are considered a qualifying expense.
Fees associated with kindergarten as well as tuition for children in first grade and above are not eligible for reimbursement under a Dependent Care FSA. Expenses related to before and after school care or nursery school expenses are eligible if the care is primarily custodial in nature.
You can use your DCFSA to pay a babysitter during your working hours. You can use your DCFSA to pay your nanny too. Per Internal Revenue Service (IRS) rules, the babysitter or nanny can't be a dependent. So, you can't pay an older child to babysit a younger child.
Your election is irrevocable for the plan year unless you have a change in status or other qualified event as defined in the IRS Regulations and your employer's plan permits such qualified changes. Qualified changes in status include: A change in marital status (such as marriage, divorce or death of your spouse)
Yes, Peloton equipment (Bike, Bike+, Tread, Row) is generally FSA/HSA eligible, but requires a Letter of Medical Necessity (LMN) from a licensed provider, often obtained through a partnership with Truemed at checkout, where you complete a health survey to see if you qualify for pre-tax purchase of hardware for managing conditions like obesity or heart disease.
The 70/20/10 rule for money is a simple budgeting guideline that splits your after-tax income into three categories: 70% for Needs (essentials like rent, groceries, bills), 20% for Savings & Investments (emergency funds, retirement), and 10% for Debt Repayment & Donations (extra debt payments or giving). It balances immediate living costs with long-term financial security, helping you cover necessities while building wealth and paying off liabilities.
Full-time caregivers, like stay-at-home parents, aren't able to be paid for the work they do using DCFSA funds. For example, if an employee has a spouse who is a stay-at-home parent, they can't use DCFSA funds to pay their spouse a salary.
Married filing separately generally disqualifies you from claiming the credit. There's a limited IRS exception for certain taxpayers who lived apart from their spouse and meet specific requirements.
The Dependent Care FSA lets you use tax-free dollars to pay for child and elder daycare costs incurred so that you and your spouse, if you're married, may attend school full-time. With the pretax contribution, you can save an average of 30 percent on dependent care services. That means you keep more of YOUR paycheck.