Dependent Day Care Flexible Spending Accounts

Dependent Day Care Flexible Spending Accounts

The Dependent Day Care Flexible Spending Account (DDCFSA) offers employees a tax-free way to reimburse themselves for eligible dependent care expenses throughout the year.

Employer payroll units deduct an employee's annual contribution amounts (in equal portions) from each paycheck throughout the plan year. At any point in the plan year, you have access to the funds that have been deducted from your pay only.

DDCFSA Details

Minimum an Employee Can Contribute: $120

Maximum an Employee Can Contribute: $5,000 per family, per year. The annual election cannot be greater than your annual income or your spouse's annual income, whichever is lowest.

Expenses Must Be Incurred: January 1–December 31 of the plan year with a grace period through March 15 of the following year. 

Deadline to Submit Claims for Reimbursement: March 31 after the end of the plan year. Any unused funds will be forfeit. 

Eligible and Ineligible Expenses

Below are some of the most frequently asked about expenses that you can or cannot use your DDCFSA to pay for. 

Tab/Accordion Items

  • Payments to nursery schools, day care centers or individuals who satisfy all state and local laws and regulations.
  • Payments for before-school care and after-school care beginning with kindergarten and higher grades. 
  • Payments to relatives for care of a qualifying dependent(s); however, the relative cannot by the employee's tax dependent or child if under age 19 as of the end of the calendar year. 
  • Payments (in lieu of regular day care) to day camp (e.g. soccer, computers, etc.), but not overnight camps.

  • Tuition expenses for education of a qualified dependent beginning with kindergarten and higher grades. 
  • Expenses incurred while you and your spouse are not working (except for short temporary absences like vacations and minor illnesses).
  • Expenses for overnight camps.
  • Virtual camps.
  • Transportation fees.
  • Prepayment for services not received while covered. 
  • Late payment fees.

Frequently Asked Questions About DDCFSAs

Tab/Accordion Items

  • A "qualifying child" under age 13 for whom the employee is the legal guardian and who has the same principal residence as the employee for more than one-half of the year and does not provide more than one-half of their own support during the calendar year. 
  • A qualifying child (as defined above) of any age, spouse or other dependent (e.g. a disabled elderly parent), who is physically or mentally incapable of caring for themself and has the same principal place of residence as the employee for more than one-half of the year and who receives over one-half of their support from the employee. 
    • To reimburse day care received outside the home, a disabled dependent must spend at least eight hours in the employee's home daily.

Note: Special rules apply for divorced or separated parents with dependent children. Generally, a child must be a dependent for whom the employee can claim on income tax exemption. You should consider consulting with a tax advisor if you have questions about whether someone qualifies as an income tax dependent.

Yes. But keep in mind, the $5,000 maximum applies to all contributions an employee and their spouse make to any DDCFSAs during the calendar year, whether through NCFlex or another employer. 

If you and your spouse file a joint income tax return, you can contribute up to $5,000 for the year, regardless of the number of eligible dependents you have. 

If you and your working spouse file separate income tax returns, your maximum contribution is $2,500. 

The DDCFSA is based on current tax laws. 

You may prefer to use dependent day care expenses to claim a Child Care Credit when filing federal and state income tax returns. 

The law permits an employee to use the Child Care Credit or the DDCFSA but not for the same expense. (The Child Care Credit is reduced dollar-for-dollar by any amount claimed through the DDCFSA.)

The spending account is an alternative way to save taxes for employees who may prefer not to file for the Child Care Credit or who would receive greater tax savings through the DDCFSA. 

An employee who is divorced or legally separated must have legal custody of their child for over half the year to participate in the DDCFSA.

Circumstances That May Affect Your Contribution Limit

If your spouse is a full-time student or totally disabled, they're treated as having income of $250 a month or $500 a month if two or more dependents receive dependent day care. 

If your spouse is unemployed and actively looking for work, their income for the year must not exceed your DDCFSA annual election.

If you're considered highly paid by the IRS, the pre-tax dependent day care election may need to be adjusted based on the results of IRS discrimination tests. You'll be notified if affected.