Real Money: Elder care and your DCFSA

As a parent, I'm always looking for the best ways to save money on child care — I talk to a lot of moms about this too. And if you're a parent, you may already know that a dependent care FSA or a DCFSA is a great way to save costs on child care expenses.

But did you know it could help aging dependents as well? As my parents get older, I can't help but wonder what would happen if they needed help. If you're in the same position, you should consider the DCFSA and whether or not you can save on costs by using pre-tax funds.

How does it work?

In order to claim reimbursement for qualified expenses for a DCFSA, you'll need a qualifying dependent. That means your elder dependent needs to live with you for a minimum of eight hours a day and be incapable of self-care. You'll also need to claim them as a dependent on your tax return.

Any expenses you wish to claim need to be related to caring for your dependent — these services are what allow you to attend school, work or actively look for work full-time.

As for how much you can contribute, it depends on how you file your taxes. If you're single or filing separately from your spouse, each of you can contribute up to $2,500. Those filing jointly can contribute up to $5,000, assuming each of you earn more than that amount each year.

If it's less, then you're limited to contributing to your DCFSA equal to the lowest earning spouse. For example, if you earn $10,000 a year but your spouse earns $4,000, then your DCFSA limit for the year can only be as much as $4,000.

Some qualifying life events will allow you the opportunity to change your DCFSA, such as changes in health care coverage, or if you suddenly need or no longer need elder care. It's best to contact your DCFSA provider if you're wondering about changes to your plan.

What counts as a qualifying expense?

According to the IRS, qualifying expenses are generally services that are primarily for the care and well-being on your dependent, whether it's in our out of your home. Qualifying care for your dependent must be to allow you and your spouse to work, go to school full time or to actively look for work. Medical expenses do not count as expenses for the DCFSA..

Some qualifying expenses include:

  • Adult day care center
  • Custodial elder care
  • Day nursing care
  • Elder care — in or outside the home
  • Transportation to and from eligible care — provided by the care provider
  • Registration fees required for eligible care

Remember you'll need to claim each of these expenses individually and provide proof of services. This may include medical documentation, receipts and other types of records — ask your DCFSA provider what's needed. It's better to have too much documentation rather than not enough. You don't want to be in a position where you can't claim your expenses.

Use your funds

Don't forget that you need you use up your DCFSA funds before the year ends or you forfeit the amount contributed. Your account may offer a grace period so you can spend down your funds, but that's not always the case. The best bet is to budget carefully for your elder care needs and check with your DCFSA provider on their specific rules and requirements.


Whether you budget week-to-week, or plan to use your FSA for bigger things, our Real Money column will help you maximize your flex spending dollars. Look for it on Tuesdays, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.


Flex-Ed: Using an FSA to cover medical costs for adults with disabilities

While it's fairly well-known that FSA holders can use the funds to pay for eligible medical expenses on adult children through the age of 26 (for FSA only) or who are tax dependents, what about adult dependents with special needs? Per the IRS, if your child is considered "completely and permanently disabled," you can claim your child as a dependent, regardless of age.

The definition of "disabled"

There are many accepted terms for people with special needs, but in the eyes of the IRS, "disabled" is still the term of record. Someone is considered completely and permanently disabled if they cannot engage in substantial activity due to a mental or physical condition; and it has been determined by a medical professional that the condition will last at least a year, if not for the rest of the person's life.

Use your funds to pay for qualified health expenses

If your dependent is a disabled adult, you'll be able to use your FSA funds to pay for eligible expenses, which might include: Special equipment, prescription medication, medical supplies, and doctor's visits. Money from your FSA can also be used to pay for long-term care insurance you might want to purchase for your adult dependent with special needs.

Dependent Care FSAs

If your employer provides you with the option, you can open a Dependent Care FSA (DCFSA). With a DCFSA, you can set aside pretax dollars to cover eligible expenses of a disabled dependent who is not able to care for themselves physically or mentally.

While the amount you can contribute to a DCFSA is ultimately set by your employer, the maximum set by the IRS is $5,000 for individuals and married couples filing jointly, and $2,500 for married couples filing separately.

Know your tax breaks

Besides claiming your adult child as a dependent on your taxes, there are a handful of tax breaks that come with dependents that have special needs:

  • An adoption credit for adopting a child with special needs
  • Earned Income Tax Credit (EITC), if you meet the other requirements
  • Child or Dependent Care Credit: If you hired someone to come to your home to care for your special needs dependent (not to be used in conjunction with a DCFSA)
  • A credit for attending medical conferences that relates to your dependent's medical condition

What's more, your adult dependent might qualify for the following deductions:

  • A higher standard tax deduction if you're legally blind
  • Certain disability-related payments might be excluded from gross income

Consider an HSA

While it's not typical for us to recommend as an FSA-focused site, in these situations, maybe an FSA isn't the right answer. Instead, it might be worth looking into a health savings account (HSA). These accounts have a handy triple-tax advantage:

  • Your qualified contributions are made with pretax dollars
  • Money in your account grows tax-free
  • You don't pay taxes on HSA funds used to pay for qualifying health care expenses

(Note: You can estimate how you can save on taxes with an HSA with our HSA Tax Savings Calculator.)

HSAs can only be funded if you have a high-deductible health plan (HDHP). The 2019 contribution limits for HSAs are $3,500 for those participating in the HDHP as individuals, and $7,500 for those participating as families.

As those with special needs have additional costs of living, such as special housing, medical devices and equipment, and higher medical expenses (i.e., more frequent and specialized doctor's visits, prescription medication), any tax savings from your HSA or FSA funds will come in handy. Plus, it'll help your dollar stretch farther.

Knowing how to make the most of the tax-free funds (from an FSA or HSA) to help pay for the health care costs of your special needs dependent will help you make the most of your money.


New to FSAs? Need a refresher course in all things flex spending? Our weekly Flex-Ed column gives you a weekly dose of FSA Living 101, offering tips for making the most of your tax-free funds. Look for it every Thursday, exclusively on the Learning Center.

Living Well

Real Money: Why a DCFSA can be a huge win for parents

If you're a parent, maximizing on childcare costs is important, considering this line item on your budget is probably one of the most expensive. Many take advantage of what's known as a dependent care FSA, or DCFSA - this account covers child care for children up to 13 years old, where a traditional FSA is aimed at covering qualified medical expenses.

Getting a DCFSA is great considering the tax benefits and the ability to use pre-tax money, but are there other ways to cut on childcare costs? In other words, are there alternatives in case your costs are higher than what the DCFSA maximums are, or do you want to enroll your child in programs that are not considered qualifying expenses?

Whatever your reason for wanting to save money, here are a few ways to save big on childcare costs.

Share a nanny

Hiring a nanny on your own can be notoriously expensive but it doesn't have to be if you share one. You and a trusted friend or family member can hire one nanny to help out with your children while you work. Yes, you can claim your share of the cost as a qualified expense under a DCFSA.

While it sounds strange to share a nanny, more people are choosing to go this route. You may be surprised that some nannies are happy to split their time amongst those in the neighborhood as it usually means more pay for them.

Nannies may have different requirements like a maximum number of children, hours or how close in age these children need to be. But if you're patient, you can often find the right fit for everyone. The perk is that your nanny gets more money, and you're paying less since you're splitting costs.

Do babysitting swaps

On that note, swapping babysitting duties is a great way to save since you're not paying for childcare, except with your time. If you get clever, it won't be much more time than if you were to watch your own. For example, if you work a 9 to 5, find someone to watch your kid during the day and you can watch theirs during the evenings or weekends.

To start a swap, try to find a few parents so there are more spaces and opportunities to fit everyone's needs and schedules. Make sure to create a system where it's fair and equitable for all — if you watch someone's child for two hours, someone else needs to watch your child for the same amount of time.

Create more flexibility in your work schedule

If none of the above options appeal to you, consider making changes to your work schedule if you are able to. A common method for parents is to try and arrange a remote work arrangement, even if it's for a few days a week. That way, you don't have to pay more for childcare — like before and after school programs.

If you have a partner, see if you can both do the same thing so that there's more opportunity to work from home. For example, one of you watches your child in the mornings and you switch in the afternoons. However, be mindful of your work requirements so that you can make that meeting without needing to constantly attend to your child's needs.

Working remotely isn't always an option and doesn't always work with younger children with more demanding needs. However it doesn't hurt to ask for partial arrangements like working shorter hours in the office and doing the rest of your work at home if it will work for you.

You can only claim money from your DCFSA for childcare expenses while you're working — so if you end up working part time, you may not be able to spend as much from your account. Check with your account provider on what their rules and regulations are so you're on the up and up about what your obligations are.


Whether you budget week-to-week, or plan to use your FSA for bigger things, our weekly Real Money column will help you maximize your flex spending dollars. Look for it every Tuesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.


Asked and Answered: What if I want to make FSA changes mid-year?

If you qualify for a life-changing event — like having a baby or getting married — you can typically make changes to your FSA without penalties or fees. Ultimately, it's up to your individual plan on if you're allowed to make a change (or not) so you'll want to check with your HR department or plan administrator on the details.

Not sure if you should change your coverage mid-year? Read on to see if these circumstances might apply to your situation.

You want to increase your coverage

If you have a traditional FSA, you may be able to increase your coverage for a qualified event. If you welcomed a new child to your family — whether through birth or adoption — you can request to increase your FSA contributions if you feel it'll help you with saving costs on qualified medical expenses.

The change in coverage should be consistent with the event. If you add a dependent through a qualifying event, your administrator may allow you increase your election. If you remove a dependent, you may be allowed to decrease it.

Things are a little different for dependent care FSAs (DCFSAs) and the rules aren't quite as strict. Let's say you want to switch preschools for your daughter. It's closer to work and you like the overall vibe of the place. The tuition increase — $800 per month — has you feeling a bit nervous because you only allotted $600 a month for your DCFSA. You may be able to increase your election because of a change in childcare provider (again something you'll want to talk with your administrator about).

Decreasing your coverage instead?

As we stated earlier, if you make changes mid-year, it needs to match the life event. So if your child is no longer eligible for coverage and ages out of your health plan, you may be able to request that your contributions be lowered instead of increased. Even if you have more qualified medical expenses, you may not be able to put more money into an FSA because that wouldn't be consistent with the qualifying event.

Note that you don't have to change your contributions due to a qualifying event. You may want to keep your contributions as is because they may still work for your situation.

No matter what your dependent situation is, it's a good idea to take stock of your current expenses and your budget and plan the best you're able to for the year. It's also a good idea to make sure in advance that your plan will allow you to make a change if you're planning to mid-year.


From FSA basics to the most specific account details, in our weekly Asked and Answered column, our team gets to the bottom of your most-pressing flex spending questions. It appears every Wednesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.


Real Money: Why I'm glad I spent more money on childcare using my DCFSA

As someone who is a self-proclaimed "cheapskate," I was thrilled when I found out a new way to save on childcare costs. Opening a dependent care FSA (DCFSA) not only allowed me to save on preschool costs but also lowered my family's taxable income.

To put my cheap tendencies into perspective, I'm the weirdo who reuses aluminum foil and washes zipper lock bags until they fall apart. I refuse to buy new shoes until I literally can't super glue the soles back on anymore. My husband constantly reminds me we can afford to spend more as we have a healthy savings rate, but I refuse to listen.

So why was I so excited to spend more money on childcare this year?

My mental health improved drastically

As someone who works from home with a young child, my schedule was often unpredictable. Even if you're just a stay home parent, you can certainly understand how hectic it can be when your toddler is having a meltdown for what seems like hours, or when you're wrangling them to try and take a nap, or even try to have a conversation on the phone without being interrupted.

As someone who likes to do it all herself, it took a toll on my physical and mental health. Trying to calm down and write an in-depth article on a finance related topic took a toll on my productivity and I found myself working some nights to make up for lost time. Or I found myself worrying before client calls whether or not my son will find some way to make a lot of background noise.

Instead of "making do," I decided to spend more money on childcare to give myself some much needed space. Instead of working around the clock, I set better work hours so I could be present for my family. I even give myself an hour a day to do whatever I want, even if that means watching something on Netflix.

I became more available to those around me and my relationships flourished.

I can earn more money

Working with a young child around you can wreak havoc on your productivity. I earn a healthy income as is but I know that if I wanted to achieve a few more financial goals my husband and I have set, then I need to increase my productivity. That means finding more uninterrupted work time so that I can take on bigger and more complex projects. Meaning, ones that require more research, interviews with subject matter experts and traveling, if need be.

The extra six hours I have from putting my son in daycare has helped me increase my own work skills. I've been taking that extra time to take on more client assignments, and taking on more responsibility for new and existing projects.

I now treat my DCFSA like a business investment. The more time I can make to earn more money, I know I can do it.

My son thrives in social settings

We don't live near a lot of family or close friends which can be hard on my son. He plays with the neighbors but it's not always consistent. I want my son to thrive and if it means giving him more opportunities to socialize outside of the home, so be it.

At the end of the day, money is meant to be spent on things that matter. And my son matters. His well-being matters. So yes, this cheapskate decided to spend extra money on childcare towards something that is important.

When I see the big grin on my son's face when I pick him up from preschool, I know it's worth it.


Whether you budget week-to-week, or plan to use your FSA for bigger things, our weekly Real Money column will help you maximize your flex spending dollars. Look for it every Tuesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.

Living Well

Our thoughts, predictions and wisdom for tax-free healthcare in 2019

2018 was a landmark year for our Learning Centers. We delivered 10 fresh pieces of content each week and welcomed a serious slate of top columnists -- many of whom don't just write about FSAs and HSAs, but who are also account holders themselves. Over the year they have shared their personal finance and healthcare stories and, in turn, helped us manage our health care spend more effectively.

Since we're at the outset of a new year, we decided to turn to the writers you've grown to trust, to see what their biggest FSA and HSA takeaways were from the year that was, and offer some thoughts on the year to come. So, here's some wisdom from the people who bring it to you each and every weekday in our Learning Centers.

Practice what you preach

Over the past few years, I've saved over $10,000 in my HSA by paying for out-of-pocket health expenses. I'm still eager to boost my long-term savings, but I'm shifting my focus to my Roth IRA and Solo 401(k). This means I'll be tapping into my HSA to pay for any major expenses — starting with a chipped filling repair in January. - Kate Dore

Learning isn't just for our readers…

My mistake was not opening an FSA sooner! Also, we waited until the last minute to schedule our annual checkups, so my goal is to do that before September of each year. - Sarah Li Cain

Family first!

I've increased my DCFSA contributions because I am now able to anticipate my childcare expenses a lot better. I have a bunch of fixed expenses and knowing that I can save on taxes by lowering my taxable income, I see it as a win-win. I'm also going to get funds reimbursed a lot sooner than later because the end of the year is always hectic, so that's one less thing on my to-do list. - Sarah Li Cain


It's our first year as a family having an HSA, but one thing we made sure to do was fully fund the account. We have a 9-month-old baby, and it just made sense with all his doctor's appointments to that account as robust as possible. - Rachel Morgan Cautero

Any personal FSA spending suggestions?

Work out your healthcare budget in advance. Have a good idea of what you'll be spending and when you might be spending it throughout the year. Having this information going into the new year will help prevent the year-end scramble to spend remaining funds by the deadline.

As we begin a new year, it's a great time to reflect back on what you did right in 2018. Look over your spending and finances to learn what you did. Seeing what you did right and where you could improve will help you in the year to come. - Tabitha Jean Naylor


Create your FSA wish list and keep it updated throughout the year. This will help you avoid scrambling for last-minute items at the end of the year. Plus, you'll be able to spread out your FSA spending more evenly throughout the year. And set a goal of buying at least one FSA-eligible item with unbudgeted FSA funds each month. It's the perfect way to take care of yourself, and your family, throughout the entire year.- Taylor Milam

And for HSA spending?

If you set aside more to cover everyday, out-of-pocket medical expenses -- the spending you'd do anyway -- then you'll increase your tax benefits, and be able to make the most of your funds. By achieving this balance, saving more to spend on things you need, the more you'll save in the long term! - Zina Kumok


If you have an HSA or a HDHP to save costs on medical care, think carefully about your actions. It's great to have these tax-free ways to save for retirement. But being too protective of your HSA and cutting back on common-sense healthcare management can be counterproductive to all of your long-term planning. - Sarah Li Cain

Expert predictions for 2019 and beyond?

It might sound obvious, but I fully expect FSA adoption to keep rising, and that more people who have these accounts will learn to use them better. This means more understanding of grace period extensions, rollover amounts, and just a better grasp of how to best maximize these funds.

Which is good! While deadlines are still a major factor for millions of FSA users, people are slowly discovering that they have a lot more freedom when setting up their FSA to match their needs.

In short - we love preparing for the 12/31 deadline, but if more people understand their rollover or grace period options, the better they'll manage their accounts throughout the year. - Brad Bortone


I anticipate HSA funds may be expanded to cover fitness products and even gym memberships. One of the surprise inclusions in the massive HSA expansion bill that passed the House in late July was the expansion of qualified medical expenses to include "gym memberships and some fitness equipment."

While this bill never made it to the Senate, it does showcase the prevailing thinking of lawmakers and industry heads, so there's a chance it could be resurrected in a new bill at some point in 2019. These were some of the best ideas to come out of 2018 HSA reform, and we think they will resurface again in 2019! -- Sean Hanft


From all of us at and, best wishes for a happy, healthy New Year!


Real Money: Using dependent care FSAs to ease your workday

Kids are awesome. But that awesomeness can be expensive. A 2018 report found that raising a child until age 18 will cost $233,610. Thankfully, you have roughly 18-26 years to balance those payments. But be ready -- some of the biggest expenses come early, starting with childcare.

Since most parents work these days, childcare isn't just a "nice to have" anymore -- it's a necessity. Daycare can run up to $1,000 a month, depending on where you live. But we're not here to point out problems, so let's get to a potential solution for offsetting those costs.

Our old friend, the dependent care FSA

Like a traditional FSA, a dependent care FSA is sponsored by your employer who will automatically withhold contributions from your paycheck. But, unlike a traditional FSA or HSA, you have to pay for the expenses with your regular checking account or credit card and then apply for reimbursement through the proper procedure.

If you choose to go this route, you'll enjoy a $5,000 annual contribution limit for parents/guardians married or filing jointly and $2,500 per person if married and filing seperately. But budget smart -- like a traditional FSA, you can only use the funds within the contribution year or deadline extension period if applicable.

If you saved $2,500 in 2018, you have to use that money in 2018. It won't roll over to the next year. For most parents, this is simple because they can easily estimate their childcare costs throughout the year.

But childcare goes beyond daycare. In addition to standard costs, your dependent care FSA can also cover some lesser-known expenses that come with raising children.

After-school care

Work doesn't always end when school does. Meaning parents have to find other ways to care for their kids before punching out for the day. The cost of after-school care is reimbursable. The only "catch" is that the primary purpose has to be for the care of the child and not for education.

In other words, don't try passing off the piano teacher or math tutor as an "after-school caretaker." It's not the same thing.


If there aren't organized after-school care programs available, the cost of a babysitter, in or out of the home, is reimbursable. The cost of the babysitter must be for taking care of a child while you're working, not for personal reasons like a party or a dinner date.

One nice touch is that generally, amounts paid to a relative for qualified child care are reimbursable. Of course, exceptions apply, but as long as your child is being cared for by a qualified adult, money spent for this purpose is generally eligible.

Day camp

The cost of day camp, including specialized day camp (soccer camp, art camp, etc.) is also reimbursable. And, when provided by the caregiver, the cost of transporting the qualifying person to and from the care location is also eligible for reimbursement.

But this is just for day camp -- overnight or sleepaway camps aren't eligible, even if they're serving the same purpose during your workday.

Job hunting

This might be the biggest boost for parents looking to enter (or re-enter) the workforce. If you're going on job interviews, the costs are reimbursable, as long as the following conditions are met:

  1. The person looking for work must have earned SOME income for the year.
  2. If married, the other spouse must be gainfully employed, looking for work, a full-time student or mentally or physically incapable of self-care.

Dependent care FSAs are a big win for people with childcare expenses. Not only do they give parents or guardians a little more freedom to do their jobs without worrying about childcare expenses, but they could potentially save them hundreds (or even thousands) in taxes when used the right way.

Please note, administrators may have specific requirements as to when an expense will be qualified and covered, and in call cases they should speak with their dependent care FSA administrator before electing and/or using their funds.

Whether you budget week-to-week, or plan to use your FSA for bigger things, our weekly Real Money column will help you maximize your flex spending dollars. Look for it every Tuesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.


Can I submit a claim to my dependent care FSA for children’s classes at Parks and Rec? i.e. tumbling/gymnastics, etc.?

By its design, a dependent care flexible spending account (DCFSA) is designed to allow workers to set aside pre-tax dollars to pay for eligible care expenses for a child, disabled spouse, elderly parent or other individual listed as a dependent who is physically or mentally incapable of self-care. Day camps, such as soccer, football, ballet, etc. are eligible with a DCFSA, provided that they enable the account holder to be gainfully employed, seek gainful employment or go to school full-time. Classes have the potential to be eligible, but on a case-by-case basis. If you can prove that these Parks & Rec classes allow you to work, seek work or pursue an education, they will most likely be covered by your benefit.