Dependent Care FSA basics

A Dependent Care Flexible Spending Account (Dependent Care FSA) is an employer-sponsored benefit that lets you set aside part of your paycheck before taxes are withheld, then use that money to pay for eligible childcare so you (and your spouse, if married) can work. It is a tax benefit, not a subsidy: it does not lower the price a provider charges, it lowers the taxable income you pay tax on.

The 2026 contribution limit

Starting January 1, 2026, the annual pretax exclusion limit for a Dependent Care FSA rose to $7,500 per household, or $3,750 for a married person filing separately. This is a permanent increase, the first since the limit was originally set at $5,000 ($2,500 married filing separately) in 1986, and it was enacted under the One Big Beautiful Bill Act. Before 2026, the limit had been $5,000 for decades except for a temporary, pandemic-era increase. Check IRS Publication 503 for the current-year figure, since a household’s actual employer plan may also cap the amount lower than the federal maximum.

Who and what qualifies

The care must be for a child under 13, or for a spouse or other dependent who is physically or mentally unable to care for themselves, and it must let you (and your spouse, if you file jointly) work or look for work. Eligible expenses include licensed daycare centers, family child care, preschool tuition (up to kindergarten), and before/after-school care. It generally does not cover overnight camp, kindergarten and above tuition, or care by your own dependent or a child of yours under 19.

How the money moves

You elect an annual amount during your employer’s open enrollment, and it comes out of your paycheck in equal installments before income and payroll taxes are calculated. As you incur eligible expenses, you submit a claim (often with a debit card tied to the account instead) and get reimbursed from what you have contributed so far. Unlike a Health FSA, a Dependent Care FSA generally has no grace period or rollover unless your employer’s specific plan allows one, so electing more than you expect to spend risks forfeiting the difference at year end. Estimate conservatively.

Dependent Care FSA versus the Child and Dependent Care Tax Credit

You cannot double-dip on the same dollars: money you run through a Dependent Care FSA cannot also be claimed for the separate Child and Dependent Care Tax Credit. For most higher-income households, the FSA’s pretax treatment is worth more than the credit; for some lower-income households, the credit can be worth more. This is a real tax decision worth running past a tax professional or the IRS’s own guidance rather than assuming one is automatically better.

How this interacts with your actual childcare bill

If your household spends more on childcare in a year than the $7,500 FSA limit, and most families with a full-time infant or toddler in center-based care will, per the prices on this site’s state pages, the FSA covers only the first $7,500 of it pretax. Use the budget calculator to see your state’s actual childcare price against your income, then decide how much of the FSA limit makes sense for your household to elect. This guide is general information, not tax advice; confirm your specific situation against IRS Publication 503 or a tax professional.