Dependent Care Flexible Spending Account

When you sign up for a dependent care flexible spending account, you elect to have a portion of your salary deducted before taxes are taken out. This means the money you contribute is not subject to federal income tax, state income tax (in most states) or Social Security and Medicare taxes. This also lowers your taxable income. For example, if your annual salary is $50,000 and you contribute $5,000 to a DCFSA, you will only be taxed on $45,000. This can lower the amount of income tax you owe.

Dependent care services, such as day care, preschool or after-school care, can be significant. By using a DCFSA, you can allocate pretax dollars toward these expenses, effectively reducing out-of-pocket costs. This can make quality care more affordable and help families manage their budgets.

Dependent care flexible spending account contributions are deducted automatically from a service member’s paycheck before taxes, making it a convenient way to set aside funds for dependent care expenses. Families can plan and budget for these expenses by contributing a specific amount to the DCFSA each pay period.