Dependent Care FSA / Employer Dependent Care Assistance Program (IRC §129)

Pre-tax payroll benefit allowing employees to set aside up to $7,500 per year (starting 2026, raised from $5,000 by OBBBA) for work-related child or adult dependent care expenses, including adult day care for a disabled spouse or elderly parent. Reduces federal income and FICA taxes. Employer-sponsored — not all employers offer it. Coordinates with (reduces) the Child and Dependent Care Tax Credit dollar-for-dollar.

A Dependent Care FSA (DC-FSA or DCAP) lets employees pay for qualified dependent care with pre-tax dollars through payroll deductions. Starting 2026 under OBBBA (P.L. 119-21): annual limit permanently raised to $7,500 per year ($3,750 for married filing separately). Tax benefit: reduces federal income tax and FICA (Social Security + Medicare) taxes on the FSA amount. Typical tax savings: employee in 22% bracket + 7.65% FICA = ~$2,218 saved on the $7,500 maximum. Qualifying dependent care expenses include: (1) Child care for children under age 13 — daycare, preschool, after-school programs, summer day camps; (2) Adult day care or in-home care for a spouse or dependent of any age who is incapable of self-care — including an aging parent or disabled adult child. Coordination: FSA contributions reduce the expense base for the Child and Dependent Care Tax Credit (Form 2441) dollar-for-dollar. Must be used during the plan year (some employers allow $610 carryover or 2.5-month grace period). Enroll during employer open enrollment. Not all employers offer this benefit — check with HR.

Some details for this program are still being verified. Check the official source for the most current information.

Services

A Dependent Care FSA (DC-FSA or DCAP) lets employees pay for qualified dependent care with pre-tax dollars through payroll deductions. Starting 2026 under OBBBA (P.L. 119-21): annual limit permanently raised to $7,500 per year ($3,750 for married filing separately). Tax benefit: reduces federal income tax and FICA (Social Security + Medicare) taxes on the FSA amount. Typical tax savings: employee in 22% bracket + 7.65% FICA = ~$2,218 saved on the $7,500 maximum. Qualifying dependent care expenses include: (1) Child care for children under age 13 — daycare, preschool, after-school programs, summer day camps; (2) Adult day care or in-home care for a spouse or dependent of any age who is incapable of self-care — including an aging parent or disabled adult child. Coordination: FSA contributions reduce the expense base for the Child and Dependent Care Tax Credit (Form 2441) dollar-for-dollar. Must be used during the plan year (some employers allow $610 carryover or 2.5-month grace period). Enroll during employer open enrollment. Not all employers offer this benefit — check with HR.

How to apply

Apply online or find more information at the official program page.