How to Use Your FSA for Dependent Care Expenses

What a Dependent Care FSA Covers and How to Spend It

A Dependent Care FSA (also called a Dependent Care Account or DCA) lets you set aside pre-tax money to pay for childcare, adult daycare, or summer camp — but only for care that lets you work or look for work. The IRS has a specific list of what counts. You cannot use it for overnight camp, tuition at a school your child attends full-time, or care by a spouse or a child under 19 who lives with you.

Money in your Dependent Care FSA comes out of your paycheck before taxes are taken out, which lowers your taxable income for the year. You then submit receipts or invoices to your plan administrator and get reimbursed. The money sits in your account until you spend it — you do not earn interest, and most plans do not let the balance roll over to the next year.

The annual limit for 2024 is $5,000 per household (or $2,500 if you are married and file taxes separately). Your employer may set a lower limit. You choose how much to contribute when you enroll, usually once a year during open enrollment, and that amount is locked in unless you have a may have access to life event like a birth, adoption, or change in childcare costs.

Key Takeaways

• Dependent Care FSA money covers childcare, adult daycare, and day camps only if the care allows you to work or search for work.
• You contribute pre-tax dollars up to $5,000 per household per year, which reduces your taxable income.
• You must submit receipts and claim forms to your plan administrator to get reimbursed; the money does not reimburse itself.
• Most plans do not roll unused money into the next year, so estimate carefully what you will actually spend.
• If your childcare provider does not give you an invoice, you can request one or use a claim form that documents the dates, amounts, and provider name.

How to Submit a Claim and Get Reimbursed

To get money back from your Dependent Care FSA, you need to submit a claim to your plan administrator. Your employer's benefits office or the plan administrator's website will have a claim form. You will need the childcare provider's name, address, and tax ID number (usually their Social Security number or EIN). You will also need an invoice or receipt showing the dates of care, the amount charged, and what the money was for.

Most providers — daycare centers, nannies, preschools, and camps — give you a monthly or annual statement. If yours does not, ask for one in writing. Some providers are reluctant because they may be unreported income, but you are may have access to to documentation of what you paid. If a provider refuses, you can sometimes use a cancelled check or bank statement plus a note describing the care, though this is weaker proof.

Submit your claim within the timeframe your plan allows — usually 60 to 90 days after you paid. Many plans now have online portals where you upload receipts and submit claims in minutes. Others still require paper forms mailed to the administrator. Check your plan documents or call your benefits office to find out which method applies to you.

Dependent Care FSA Limits and the Tax Credit

The IRS sets an annual cap of $5,000 per household for Dependent Care FSA contributions. This is separate from the Dependent Care Tax Credit, which is a different way to reduce your taxes on childcare costs. You cannot use the same dollar of childcare expense for both — you have to choose which one saves you more money.

The tax credit is worth 20 to 35 percent of your childcare costs, depending on your income. The FSA saves you money by reducing your taxable income, which is worth your marginal tax rate (roughly 12 to 24 percent for most households). For many families, the FSA saves more money because the tax rate is higher than the credit percentage. However, if your income is very low, the credit might be better. You can work through both scenarios or ask a tax preparer to run the numbers.

If you use the FSA, you cannot claim the same expenses on the tax credit. For example, if you contribute $3,000 to your Dependent Care FSA and your childcare costs $5,000 total, you can claim the remaining $2,000 on the tax credit — but not the $3,000 you already set aside in the FSA.

What Happens to Unused Money at Year End

Most Dependent Care FSA plans follow a "use it or lose it" rule: any money you do not spend by the end of the plan year is forfeited. Some plans offer a grace period of up to 2.5 months into the next year to submit claims for expenses from the prior year, but the money itself does not carry over. A few employers offer a carryover of up to $570 (as of 2024), but this is uncommon and you would need to check your plan documents.

Because of this rule, you should estimate conservatively. Add up what you actually spent on childcare last year, account for any changes (a child starting school, a provider raising rates, a new baby), and contribute that amount. If you are unsure, contribute less rather than more — you can always adjust at the next open enrollment.

If you have a major life change mid-year — your childcare provider closes, you have a second child, or your work situation changes — you may be able to change your contribution amount. Life events that may have access to include birth or adoption of a child, significant change in childcare costs, change in your work schedule, and loss of childcare. Contact your benefits office right away if this happens to you.

Providers Who Will Not Give You Documentation

Some childcare providers, especially informal or unlicensed ones, do not want to provide invoices or tax IDs because they may not report the income to the IRS. This puts you in a difficult position: you cannot claim the expense without documentation, but the provider will not give it to you.

Start by asking in writing — email or a note — for an invoice. Keep a copy of your request. If the provider refuses, you have a few options. Some FSA plans will accept a signed statement from you describing the care, the dates, and the amount paid, along with proof of payment (a cancelled check, bank transfer, or credit card statement). Call your plan administrator and ask what documentation they will accept if the provider will not cooperate.

If the provider still refuses and your plan will not accept alternative documentation, you cannot use that expense in your FSA. You might be able to claim it on your tax return using the Dependent Care Tax Credit instead, which has looser documentation rules — but check with a tax preparer first. Going forward, consider whether an unlicensed provider is worth the tax complications.

Dependent Care FSA and Employer-Sponsored Childcare

If your employer offers on-site childcare or subsidizes care at a partner provider, you can usually use your Dependent Care FSA to pay your portion of the cost. The same rules apply: you need documentation of what you paid, and the money must be for care that lets you work.

Some employers offer a Childcare Spending Account as part of their benefits package, separate from the FSA. This works the same way — pre-tax contributions, reimbursement for childcare expenses — but the rules and limits may differ slightly. Check your benefits guide to see whether your employer offers both or just one.

If your employer offers a childcare subsidy (they pay part of your childcare bill directly), that subsidy does not count toward your $5,000 FSA limit. Only the amount you contribute from your own paycheck counts. This means you can use the FSA on top of an employer subsidy without hitting the cap faster.

Frequently Asked Questions

Can I use my Dependent Care FSA for a nanny or babysitter?

Yes, as long as the nanny or babysitter is caring for your child while you work or look for work. You will need their name, address, and tax ID (usually their Social Security number). Ask them for an invoice or receipt showing the dates and amounts paid. If they do not have one, request one in writing and keep a copy of your request.

What if I change jobs mid-year?

Your Dependent Care FSA is tied to your employer's plan, not to you. If you leave your job, you lose access to the money remaining in your account — it does not transfer to your new employer's plan. You can only use the balance through your last day of employment. At your new job, you can enroll in their Dependent Care FSA during open enrollment or if you have a may have access to life event.

Can I use the FSA for overnight summer camp?

No. The IRS only allows Dependent Care FSA money for day care — care that happens while you are at work. Overnight camp, sleep-away camp, and camps that run for more than a few hours per day do not count, even if they are educational. Day camps that run during business hours do count.

What if my childcare costs less than I contributed?

The unused money is forfeited at the end of the plan year (or the grace period, if your plan offers one). You cannot get it back or roll it to the next year. This is why it is important to estimate carefully. If you think your costs will drop, you can request a change to your contribution amount if you have a may have access to life event, such as a child starting school.

Do I need to report my Dependent Care FSA on my tax return?

No. Your employer reports the pre-tax contribution to the IRS, and it is already excluded from your taxable income. You do not claim it again on your tax return. However, if you also use the Dependent Care Tax Credit for other childcare expenses, you will report that on Form 2441 when you file.