Dependent care FSAs

With a dependent care flexible spending account, employees can save money on child and elder care costs by lowering their taxable income.

Tax-saving benefits

When you offer dependent care flexible spending accounts (FSAs), your employees can set aside pretax dollars through payroll deductions to pay for eligible child and elder care costs — enabling them to save money by lowering their taxable income.

As the employer, you will also save money when you offer a dependent care FSA. Because FSAs are funded through pretax payroll deductions, employers who offer them do not pay Social Security and Medicare (FICA) taxes on their employees' contributions to these accounts (except for ministers' contributions).

Eligible expenses

Employees who participate in a dependent care FSA can save money on eligible expenses for

  • childcare costs for children under 13 years of age, including in-home childcare, payments to licensed day care facilities, and before- or after-school programs; and
  • adult day care for older family members who are unable to care for themselves and are claimed as dependents on the employee's federal income tax return.

The IRS requires dependent care expenses to be necessary for the employee or employee's spouse to work, look for work, or attend school full time. Read more details about how dependent care FSAs work.