Dependent Care FSA: How Reimbursement and Tax Reporting Work

A Dependent Care FSA (DCFSA) is a workplace account funded by pre-tax payroll deductions. You pay care costs out of pocket, then apply for reimbursement, and report the deduction on IRS Form 2441 with your Form 1040.

How a Dependent Care FSA works

1. The account is set up through a participant's workplace.
2. Participants authorize their employer to withhold a specified amount from each paycheck and deposit the money into the account.
3. Instead of using the FSA money to pay for expenses directly, participants pay those costs out of pocket.
4. Participants then apply for reimbursement from the account.

What a Dependent Care FSA pays for

A DCFSA is used to pay for childcare or adult dependent care expenses that are necessary to allow the participant, and their spouse if married, to:

• work,
• look for work, or
• attend school full-time.

Important: Dependent care costs are considered ineligible if an individual does not find a job and has no earned income for the year.

Tax forms you will need

Additional resources

The following DCFSA references contain more information:

• Flexible Spending Account
• Dependent Care Flexible Spending Account (FSA) Benefits
• What is a Dependent Care Flexible Spending Account?
• Flexible Spending Account - Dependent Care Account

Frequently asked questions

What can a dependent care FSA be used for?

A dependent care FSA is used to pay for childcare or adult dependent care expenses that are necessary to allow the participant, and their spouse if married, to work, look for work, or attend school full-time.

How does money get into a dependent care FSA?

Dependent Care FSAs are set up through a participant's workplace. Participants authorize their employer to withhold a specified amount from their paycheck each pay period and deposit the money into the account.

Do I pay my care provider directly from the account?

No. Instead of using the FSA money to pay for expenses directly, participants pay those costs out of pocket and then apply for reimbursement.

What happens if I am looking for work but do not find a job?

Dependent care costs are considered ineligible if the individual does not find a job and has no earned income for the year.

Which tax forms do I need for a dependent care FSA?

IRS Form 2441 should be filed with your Form 1040 when dependent care has been deducted from your pay. The dependent care deduction is shown in Box 10 of the Form W-2 provided by your employer.