Have you heard of the Dependent Care Flexible Spending Account? It’s OK if you haven’t. If your employer offers the account as a part of your benefits package you would normally hear about it during open enrollment. I feel like it is an overlooked benefit that could possibly save you money if you pay for childcare or dependent care expenses. Here are a few Q&As about the Dependent Care Flexible Spending Account.
What is the Dependent Care Flexible Spending Account (Dependent FSA)?
The Dependent Care Flexible Spending Account is a pre-tax account that helps you save money on daycare (nanny), pre-school, before/after school and summer camp expenses for your child(ren) under 13 years old and for the care of a spouse or relative who lives in your home but is unable to care for themselves while you are at work.
You can contribute a maximum amount of $5,000 per year if you file single, head of household, or married filing jointly and $2,500 if you file married filing separately.
How does it help me save?
The money you contribute to your Dependent Care Flexible Spending Account is not subject to payroll taxes so you will bring home more money and pay less taxes since your contribution is deducted from your paycheck before taxes are assessed.
Here’s the link to the WageWorks calculator that helps you calculate how much you will save.
How do I sign up?
If your employer offers the Dependent Care Flexible Spending Account, you are eligible to sign up during open enrollment which is normally near the end of the year. The funds in the flexible spending account are use it or lose it so you need to estimate how much you will spend during the year and if you are setting it up for school-age children make sure you plan properly for the summer. When I used this account I would always underestimate so I would not lose the money I contributed.
How do I get my money back?
To be reimbursed for your expenses, you will need to file a claim to receive the funds back. Every company handles this differently so make sure you ask your benefits office about the reimbursement process before you sign up.
With childcare being a large expense for some families, if your employer offers the Dependent Care Flexible Spending Account you should really talk to your benefits office to see if it is a good option for your family.
Hopefully, the Dependent Care Flexible Spending Account will benefit you and if not please send this post to someone who could possibly benefit.
