Dependent Care Account/ Day Care Spending Account

Updated on January 18, 2013
A.F. asks from Albany, CA
4 answers

Whatever you want to call it : ) My employer offers one and I take advantage of it to the full $5000.00 limit. My husbands employer now offers one. Are we allowed to have two? To answer any the question. Yes if it is allowed, it would benefit us. We have three kids, two in full time day care and one in after school care. Not working is not an option ~ yet. Soon I hope it will be. However in the meantime is this allowed? Thanks.

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So What Happened?

I found this on Wikipedia and I think it has the most straighforward answer (other than you guys who were all correct and told me what I thought I already knew, but was hoping otherwise.).

Dependent care FSAFSAs can also be established to pay for certain expenses to care for dependents who live with someone while that person is at work. While this most commonly means child care, for children under the age of 13, it can also be used for children of any age who are physically or mentally incapable of self-care, as well as adult day care for senior citizen dependents who live with the person, such as parents or grandparents. Additionally, the person or persons on whom the dependent care funds are spent must be able to be claimed as a dependent on the employee's federal tax return. The funds cannot be used for summer camps (other than "day camps") or for long term care for parents who live elsewhere (such as in a nursing home).

The dependent care FSA is federally capped at $5,000 per year, per household. Married spouses can each elect an FSA, but their total combined elections cannot exceed $5,000. At tax time, all withdrawals in excess of $5,000 are taxed.

Unlike medical FSAs,[6] dependent care FSAs are not "pre-funded"; employees cannot receive reimbursement for the full amount of the annual contribution on day one. Employees can only be reimbursed up to the amount they have had deducted during that plan year.

If married, both spouses must earn income for the Dependent Care FSA to work. The only exception is if the non-earning spouse is disabled or a full-time student. If one spouse earns less than $5,000 then the benefit is limited to whatever that spouse earned. Many plan coordinators do not warn of this limit. This limitation can create a situation where the earning spouse sets up a Dependent Care FSA and dutifully sends in receipts to withdraw funds and then at tax time the FSA is effectively eliminated and all the work wasted. See IRS Form 2441 Part III for details

More Answers



answers from Boston on

No you can't. But contrary to what someone posted below, after school care absolutely applies and we put in for it every year.

And those of is with more than one qualifying child use the dependent care account and the child care tax credit together - basically you'll max out the dependent care account's tax advantages at $5K but because you have 2 kids and are eligible for up to $6K under the child care tax credit, the extra $1K in expenses (from $5K to $6K) would be eligible for the child care tax credit. Any basic tax software or accountant would be able to enter those amounts pretty easily.

At the end of the day, it isn't much of a savings but every little bit helps!

2 moms found this helpful


answers from Washington DC on

Here's what this link said:

The cap is $5,000 for single heads of household or folks who are married and filing jointly. Here are some other aspects of flex spending accounts to consider:

You must open a Dependent Care Flexible Spending Account during the annual enrollment period. To make any changes to the amount you're having deducted, or to enroll outside of that window, you'll have to meet the criteria for a "qualifying event." Check with your HR representative to find out if you qualify.
Unlike a health-care flexible spending plan, you cannot get reimbursed for an expense that is greater than the amount you currently have set aside in your account.
Flex spending plans work under the "use it or lose it" principle, which means that if you haven't spent the total amount by the deadline and requested reimbursement, you can say goodbye to the money. Therefore, your calculations to determine how much to set aside need to be as accurate as possible.

Child-care tax credit
The Child-Care Tax Credit allows you to apply up to $3,000 of expenses paid in a year for one qualifying individual, or $6,000 for two or more qualifying individuals, to your taxes through the Dependent-Care Tax Credit. In order to claim the credit, you must fill out Form 2441: Child and Dependent-Care Expenses (opens a PDF) when you file your federal return.

To take the Child Care Tax Credit, you don't have to fill out any enrollment forms or have money taken out of your paycheck. You do have to file your federal tax return by the IRS deadline, however.
The "use it or lose it" rule doesn't apply, since none of your money has been taken from your paycheck outright.
Since the amount of the credit is based on your adjusted gross income, folks in higher tax brackets may be able to save more under the flex spending program.

Which one should I choose?
The answer to this question depends entirely on your family's adjusted gross income, your tax bracket, and how many dependents you have. Take a look at this worksheet designed to help figure out which benefit will save you the most money, then check with your tax advisor to see what works best for your particular situation.

You can also talk to the IRS and ask them as well.

1 mom found this helpful


answers from St. Louis on

No, the only way you could both do it is if you were married filing single and by doing that it would cost you much more than the deduction saves you.

1 mom found this helpful


answers from Pittsburgh on

Nope, wish I could too!

However, you can use the $5000 flex plan for one child in daycare, and when tax times comes, you can claim the child care tax credit for the other child in daycare.

Neither applies to aftercare expenses once your child is in school.

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