Dependent Daycare Flexible Spending Account

A Dependent Daycare Flexible Spending Account (DCFSA) allows employees to pay for eligible daycare expenses on a pre-tax basis. At the beginning of the Plan Year, employees elect the amount they wish to have withheld from their paycheck on a pre-tax basis. When they incur allowable expenses during the Plan Year, they can either use their provided debit card or submit a claim for reimbursement. The amount available on the debit card and for reimbursement is limited to the funds actually withheld from their paycheck. 

Dependent Daycare FSA Reimbursement Limits

Reimbursement for dependent daycare expenses under the Dependent Daycare Flexible Spending Account may not exceed the lowest of the following limits for 2026:

1. $7,500 if you are single, head of household, or married filing jointly, or $3,750 if you are married filing separately.

2. Your earned income (after any pre-tax salary reductions).

3. Your spouse’s earned income, if married.

For item (3), your spouse is considered to have earned $200 per month (or $400 per month if you have two or more eligible dependents) for any month in which they are a full-time student or physically or mentally incapable of self-care.

Qualifying Expenses Under the Dependent Daycare Flexible Spending Account

To qualify for reimbursement, the expense must be for the care of an individual who qualifies as the employee’s dependent for purposes of the Dependent Daycare Flexible Spending Account (DCFSA).  An eligible individual must be one of the following:

• A child under age 13 whom the employee may claim as a dependent on their federal income tax return (including a child under age 13 whom the employee supports but cannot claim as a dependent solely due to a written declaration or divorce decree); or
• A spouse or other tax dependent (or a supported child who cannot be claimed as a dependent solely due to a written declaration or divorce decree) who is physically or mentally incapable of self-care.

Eligible expenses must be incurred to allow the employee (and spouse, if applicable) to be gainfully employed and must be for the care of an eligible individual or for related household services.  For care provided outside the employee’s household, the expenses qualify only if the dependent regularly spends at least 8 hours per day in the employee’s home (IRS Code §21(b)(2)(B); Treas. Reg. §1.21-1(e)(1)). 

Some common eligible expenses include:

• Daycare centers, nursery schools and preschool (care portion only)
• Before- and after- school care
• Summer day camps
• Babysitters, nannies, or au pair care while the employee works
• In-home care for a dependent who is physically or mentally incapable of care

Expenses for Dependent Care Centers may be eligible if the services are provided by a dependent care center (a facility caring for more than six individuals who do not live there). The center must comply with all applicable state and local licensing laws and regulations.

Expenses cannot be reimbursed if a person providing babysitting or dependent care is the employee’s child who is under age 19 at the end of the calendar year—even if that child is not the employee’s dependent. Care also cannot be paid to anyone the employee or spouse claims as a dependent on their tax return.

For more information regarding the IRS rules regarding Child and Dependent Daycare Expenses click here: https://www.irs.gov/pub/irs-pdf/p503.pdf to view IRS Publication 503.

How the Harrison Group helps you with a Dependent Daycare Flexible Spending Account

• Customer Service is our FOCUS – Your employees will need to devote a little bit of time paying for these out of pocket expenses and/or submitting claims for their health savings accounts. Recent studies show that only 44% of employees fully comprehend their benefits. It is critical to select a Dependent Daycare FSA administrator who not only answers the phone but also assists employees when they have questions. We offer considerable resources to provide both onsite and online education for your employees.
• A Partner with Proven Expertise – With over 30 years of experience in the industry, our clients have come to rely on us to partner with them and their health insurance broker to provide the necessary education and benefits plan consultation.
• Concierge Customization – One size does not fit all.  We offer customized solutions to meet your specific objectives regardless of your size or demographics.
• Technological Advances – We offer the latest in industry-leading technology to our clients including a web and mobile application for accurate claims submission.  We also offer online education for employers and their employees.

If you have questions about the Dependent Daycare FSA or other offerings, please give us a call or contact us online.  We will be happy to assist you.

• Dependent Care FSA Eligibility List 
• Dependent Care FSA Information Sheet -2026