Nanny: FSA Eligibility

The expenses incurred from hiring a nanny are not eligible for reimbursement with a flexible spending account (FSA), health savings account (HSA), health reimbursement arrangement (HRA) or a limited care flexible spending account (LCFSA). However, a dependent care flexible spending account (DCFSA) will cover nanny expenses related to the care of a child, disabled spouse, elderly parent or other dependent who is physically or incapable of self-care.

How do dependent care flexible spending accounts cover child care?

Dependent care flexible spending accounts (DCFSA) are the only consumer spending accounts that will cover the cost of hiring a nanny for child care, but they have a rigid set of standards that dictate how reimbursement is handled. First, qualified dependents under a DCFSA include children under the age of 13, or dependents of any age who are physically or mentally incapable of self-care. Most importantly, expenses for the care of these dependents is only eligible if these care services enable the account holders/spouses 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.

Important considerations for nanny expense reimbursement

When hiring a nanny for child care, the vast majority of benefits administrators will require specific information about the caretaker to allow these expenses to be fully reimbursed. First, receipts for payments to care providers must be provided, as well as the social security number/tax identification provider for any nanny or babysitter who is hired for child care.

Additionally, the expenses associated with hiring a nanny for child care are deducted from the employee's paycheck and then reimbursed as a qualified expense. It's important to note that because this is a pretax deduction, the contribution an account holder pays must be less than the income that the account holder/spouse. For instance, if one chooses to set aside $3,000 in a DCFSA, the account holder and spouse must make at least that much to qualify.

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

Additional Information

May be eligible under a Dependent Care FSA.

Specifically Not Covered

Not eligible with an FSA, Limited FSA, HRA or HAS

 


AZ-PROD-WEB02 11/19/2017 1:01:46 AM