Dependent Care Flex Account
Dependent Care Reimbursement Accounts allow persons to pay for eligible dependent-care expenses with "before tax" dollars when they and/or their spouse are working or actively looking for work or when the spouse is a full-time student. Baby-sitting expenses do not qualify.
Before deciding to enroll, employees should compare the benefits of a Flexible Dependent Care Reimbursement Account against the benefits of a federal tax credit. Expenses reimbursed through the Flexible Dependent Care Reimbursement Account may not be taken as federal tax deductions or credits. Consult a tax adviser if you have questions about your individual situation. It is the employee's responsibility to comply with IRS regulations.
- Children under age 13 and for whom the taxpayer is entitled to a dependent deduction under the Internal Revenue Code
- Spouses who are physically or mentally incapable of self-care
- Any other person considered a dependent for tax purposes who is physically or mentally incapable of self-care
Eligible Dependent-Care Expenses
The following is a partial list of expenses that may be eligible for reimbursement through the Flexible Dependent Care Reimbursement Account:
- Payments made for services provided in the home, as long as services are not provided by someone you also claim as a dependent or by a person who is younger than 19.
- Payments made for dependent child-care services outside the home for children younger than 13. If services are provided by a dependent-care center that cares for at least six people (other than residents), the center must be in compliance with state and local laws.
- Expenses for summer day-camp programs, when the primary purpose of the camp is care; however, if camp hours exceed the employee's working hours, only expenses incurred during work-related hours are eligible for reimbursement. Overnight camp is NOT an allowable expense, even on a prorated basis.
- Payments made for care outside the home for a spouse or dependent of any age who is mentally or physically disabled and who spends at least eight hours a day in the home (this restriction does not apply to dependents under the age of 13).
For more information about eligible and ineligible dependent care expenses, refer to IRS Publication 503, Child and Dependent Care Expenses, available from the IRS or at the IRS Web site.
Maximum contributions are $2,500 for married taxpayers filing separately and $5,000 for single or married taxpayers filing jointly. Employees may not begin, stop or change their election within a plan year unless certain changes in the family or employment status occur. Participants may need to choose between a Dependent Care Reimbursement Account or the federal care tax credit.