Dependent Care Assistance Program

How Dependent Care Benefit Plans Work

Dependent Care Assistance Program2021-07-01T12:15:53-04:00

What is a DCAP and how does it work?

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.

For many people, the cost of day care, nursery school, or supervision for an aging parent is a significant monthly expense. A DCAP additionally serves as an alternative to the Dependent Care Tax Credit.

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DCAP funds cover summer or holiday day camps, and child care at a day camp, nursery school, or by a private sitter.

So your family is taken care of while you are busy working hard.

Dependent Care FSA Questions Answered

Flexible Spending Accounts

Save money on health and dependent day care expenses with Flexible Spending Accounts (FSAs) from ConnectYourCare.

Two ways to save!

  • A Health Care FSA allows you to set aside pre-tax money for eligible health care expenses.
  • A Dependent Care FSA allows you to set aside pre-tax money for eligible dependent day care expenses.

Learn more about Dependent Care FSAs and Health Care FSAs in our Flexible Spending Accounts Infographic!

Dependent Care Assistance Program Infographic on Tablet
Even with the best plan, you are likely to have out-of-pocket expenses each year. If you have children and have to pay for child care, a dependent care account can help stretch your hard-earned dollars.

A Dependent Care Assistance Program (DCAP) covers employment-related expenses for child care. Qualified expenses must be for services that allow for you to be able to go to work.

Typical expenses under this account include charges for day care, nursery school and elder care (though not if it is for medical care) for your legal tax dependents. For a list of eligible expenses, please see Qualified DCAP Expenses and IRS Publication 503 – Child and Dependent Care Expenses.

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.

  • 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.

Get the answers to more Frequently Asked Questions.

Why open a DCAP?

  • Every dollar you set aside in your account reduces how much you pay in income taxes
  • Use it for child and elder day care while you work, like before- and after-school care expenses, summer day camp, nursery school, and pre-school

Dependent Care FSA Contribution Limits:

Married Filing a Joint Return or Single Parent
Married Filing Separately, Per Parent

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Eligible Expenses

Find DCAP Eligible Expenses

Find out what types of expenses are eligible for reimbursement

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Get Answers

There’s a lot to know about DCAP, which is why we’ve put together these FAQs

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Learn why a Dependent Care Assistance Program may be right for you

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Get Helpful Tips

Our blog, Connections, is the perfect place to find helpful benefits articles

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See a Quick Overview

Learn how FSAs can help you pay for health and dependent care expenses

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COVID-19 Personal Protective Equipment (PPE) Now Eligible for FSA, HSA, and HRA Reimbursement

By |March 30th, 2021|

On March 26 the Internal Revenue Service (IRS) released IRS Announcement 2021-7, which states that personal protective equipment such as masks, hand sanitizer, and sanitizing wipes that are purchased “for the primary purpose of preventing the spread of COVID-19” (COVID-19 PPE) are qualified medical expenses under Section 213(d) of the Code.

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