Dependent Care Reimbursement Account
News: The Internal Revenue Service (IRS) has updated the Internal Revenue Code (IRC) § 1.21, eligibility requirements for qualified Dependent Care expenses. These new regulations are effective immediately. Details...
A Dependent Care Reimbursement Account can be used to reimburse for eligible daycare expenses for children age 12 and under or for adult daycare expenses for a disabled spouse or IRS tax dependent. The maximum annual deduction is $5000 (or $2500 if married and filing separately).
The primary purpose of Dependent Care expenses must be for "custodial care" and allow you and your spouse, if married, to be gainfully employed, looking for work or a full time student. Just because an expense is incurred during working hours does not necessarily make it an eligible dependent care expense. Please read below a list of eligible and ineligible dependent care expenses. For additional information on eligible dependent care expenses, see § 129 of the Internal Revenue Code.
Reminder: Income tax credits are also available for childcare expenses. You may want to consult a financial adviser to determine whether a Flexible Spending Account or tax credit is a better option.
Ineligible Dependent Care Expenses
- Payments to a spouse or parent of a qualified individual
- Educational Fees/Tuition
- Overnight camps
- Food, clothing
- Care not related to work
- Transportation expenses provided by parents
Eligible Dependent Care Expenses
- Before and after school care for children under the age of 13
- Care provided in your home (provider cannot be an IRS tax dependent or a dependent under the age of 19)
- Home or daycare for eligible disabled IRS tax dependents (must spend at least eight hours per day in your home)
- Licensed day-care providers
- Registration Fees (Provided the qualified dependent actually receives the care)
- Summer day camps for children under the age of 13 (even if overall theme of camp is entertainment or educational in nature)
