DCAP — Dependent Care Assistance Program

For many people, the cost of day care, nursery school, or supervision for an aging parent is a significant monthly expense. A Dependent Care Assistance Program (DCAP) allows you to pay for these expenses while reaping an important tax break.

Sometimes known as a “Dependent Care FSA,” these funds can be used to pay for certain care expenses for qualifying dependents—children, a disabled spouse, or legally dependent parents.* A DCAP serves as an alternative to the Dependent Care Tax Credit.

Dependent Care Account Rules and Regulations

Like an FSA, you must use all of your DCAP funds by the end of your plan year. Remaining funds are forfeited, according to IRS regulations.

ConnectYourCare’s DCAP calculator helps account holders estimate dependent care expenses in order contribute the optimal amount.

According to the IRS, you may contribute up to $5,000 per year if you are married and filing a joint return, or if you are a single parent. If you are married and filing separately, you may contribute up to $2,500 per year per parent.

Unlike a health care FSA, you may only receive reimbursement from your DCAP account equal to the amount you have actually deposited.

Basic qualifications and restrictions:*

  • Expenses must be necessary in order for you/spouse to work or look for work (unless your spouse was either a full-time student or incapable of self-care).
  • Payments cannot be made to another of your legal dependents, or to your child who is under age 19.
  • You must file taxes as “single, qualifying widow/er with a dependent child, married filing jointly, or married filing separately.”
  • You and your spouse must maintain a home that you live in for more than half the year with the qualifying child or dependent.

* See IRS Publication 503 – Child and Dependent Care Expenses to learn more about which expenses will qualify.