Babysitting and child care: FSA Eligibility

How is babysitting/child care covered?

Consumer spending accounts, such as FSAs, HSAs, HRAs and others are designed to cover products and services that prevent, diagnose, treat or mitigate a specific medical condition with tax-free income, so babysitting and child care would not fall into this category. However, because child care expenses are such heavy burden for some families, dependent care flexible spending accounts are another option to give families a means of paying for child care with tax-free income.

How do DCFSAs work?

A DCFSA allows parents to put aside up to $5,000 (or $2,500 for married individuals filing separately) and are offered through employers for workers to use pre-tax income to cover a wide variety of child care expenses, including care by a nanny or daycare arrangements. By definition, a DCFSA allows parents or caregivers to pay for eligible expenses for a child under the age of 13, disabled spouse, elderly parent or any other dependent who is physically or mentally incapable of self-care. In turn, this support must give the account holder or spouse (if married) the ability to work, look for work or go to school full-time (FSAFEDS).