What are eligible expenses for the dependent care FSA?
To be an eligible expense for the dependent care FSA, it must be:
•For care of children under age 13, or for care for your lawful spouse or another eligible dependent who is incapable of self-care (however, there may be no reimbursement for some dependents over age 13 if they exceed certain income limits)
•For day care, babysitting and housekeeping related to this care
•For payments to relatives who care for an eligible dependent and who are not claimed as a dependent on your federal income tax return (including your child if the child is at least age 19 and not claimed as a dependent)
•For before- and after-school care programs, if the expenses are itemized separately from the tuition expenses
•To allow you to work and, if you are married, to allow your spouse to work or attend school full-time
In addition, these rules apply to the dependent care FSA:
•Reimbursed expenses lower the amount you can claim on the Federal Dependent Care Tax Credit
•Contributions may be limited depending on the employment status and income of you and your lawful spouse. Some financial planners suggest that if your family’s adjusted gross income is more than $24,000, you’ll probably save more in taxes by using the dependent care FSA. If your family’s adjusted gross income is $24,000 or less, you may be better off using the federal tax credit. Also, you may want to consult a tax advisor about your own situation.