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Everything You Need to Know About DCAP

A Dependent Care Assistance Program is a tax-exempt benefit provided by employers to employees to help pay for the care of a dependent. It is a type of Flexible Spending Account (FSA) where you set aside tax-free dollars from your paycheck to use as payment for eligible daycare services. After paying for care and filing a claim, employees are reimbursed for the expenses incurred from the DCAP account.

Unlike FSAs, DCAP funds are available only as they are accrued, per payroll deduction. Funds do not roll over, so any remaining funds in the DCAP account are lost if not used at the end of each plan year.* Yet, like an FSA, DCAP elections cannot be changed, except in the case of a qualifying event, e.g., a change in legal marital status, number of dependents, or employment status.

Qualified Dependents:

  • A dependent who is 12 years old or younger
    • Includes stepchildren, grandchildren, adopted or foster children, and children related to you who are eligible for a tax exemption on your federal tax return.
  • Tax dependents residing with you and incapable of self-care (this could include your spouse, a child 13 and over, and elderly parents)

Use Your DCAP to Pay for the Following:parent with children holding hands on the way to school

  • Daycare/Pre-school/Pre-kindergarten
  • Before – and after – school care (Extended day)
  • Summer day camps (overnight camp does not qualify)
  • Adult/Elderly care programs
  • Babysitting during work and/or college hours
  • Sick childcare
  • Deposits for childcare

Not all eligible items are listed. To see what expenses are eligible for DCAP, you can visit the FSA store.

Read our blog from May to learn more about the DCAP limits for 2022.

If you currently have any questions about your current DCA account or would like to learn more, contact us.

 

*Excluding optional Consolidated Appropriations Act changes.