After-School Care or Extended Day Programs: FSA Eligibility

After-school care or extended day care program reimbursement is not eligible with a flexible spending account (FSA), health savings account (HSA), health reimbursement arrangement (HRA) or a limited care flexible spending account (LCFSA). After-school care or extended day care program reimbursement is eligible with a dependent care flexible spending account (DCFSA).

How is after-school care covered?

After-school care or extended day care programs are invaluable for working parents or those who are pursuing an education to balance child care and their efforts to make a living and support their families. Parents who are looking for assistance in covering child care have a choice between the child care tax credit or an employer-sponsored dependent care flexible spending account (DCFSA).

Child Care Tax Credit

First, parents have a choice of opting for the childcare tax credit, which provides a 20-to-35 percent rebate on child care expenses up to $3,000 (or $6,000 with two or more children). According to current IRS regulations, if parents’ adjusted gross income (AGI) is less than $15,000 per year, they will be entitled to the full tax credit (35 percent), while if their AGI is more than $43,000 per year, they will be reimbursed 20 percent.

Dependent Care Flexible Spending Account (DCFSA)

After-school care or extended day care programs are eligible for reimbursement with a DCFSA, as long as these expenses allow caregivers to work, look for work, or go to school full-time. If an employee has a spouse that is a stay-at-home mother or father, he or she cannot participate in dependent care FSAs.

The minimum and maximum amounts allowed to be contributed to a DCFSA are set by the employer and the maximum set forth by the IRS is $5,000 for individuals or married couples filing jointly, or $2,500 for a married person filing separately. As opposed to Healthcare FSAs, expenses can only be reimbursed under a DCFSA that fall within a current account balance, which may make it more difficult to cover large claims early in a given year.

Eligibility Table

Flexible Spending Account (FSA) Limited Care FSA Dependent Care FSA Health Savings Account (HSA) Health Reimbursement Account (HRA)

Eligible

Eligible with Rx

Eligible with LMN

Not Eligible

Specifically Not Covered

Not eligible with an FSA, Limited FSA, HRA or HSA.

 


AZ-PROD-WEB02 11/20/2017 3:19:43 PM