School’s Out for Summer: Save on Summer Daycare with Your FSA

Summer is here (finally!) and many families are settling into new routines, carefully planning summer vacations around work schedules and commitments. It’s no doubt a busy time of year for people – especially working parents who have to worry about child care.

Luckily, there’s some financial relief available for summer child care costs through Dependent Daycare Flexible Spending Accounts (FSAs).  This pre-tax advantaged account gives you an average of 30% savings on eligible dependent daycare expenses.


How the Dependent Daycare FSA Works

  • You choose to contribute a certain dollar amount – pre-tax – into the Dependent Daycare FSA.
  • Your contribution amount is divided by the number of pay periods you have in a year, and that amount is deducted from your paycheck, pre-tax, every pay period.
  • Because you are using pre-tax dollars – money before taxes are deducted – you save approximately 30% with an FSA.  A 30% savings can make a huge impact on your budget!

If you have a child or dependent who attends a summer day camp, take advantage of the savings an FSA offers. Use an FSA to pay for those summer daycare expenses, as long as your child is under age 13, per IRS rules.  Overnight camps are not an eligible expense, so the Dependent Care FSA is unable to reimburse for it.  You can also use this account to pay for other qualifying expenses, like nursery schools, adult day care or eldercare for your parents who are dependents.


Dependent Daycare FSA Example

Your FSA contribution amount: $2,500 You get paid bi-weekly, so there are 24 pay periods Divide $2,500/24 = $104.16

You will have approximately $104.16 deducted pre-tax from your paycheck every pay period.

Need a refresher? Penny Panda explains what a Dependent Daycare FSA is.


Important Dependent Daycare FSA Rules to Remember

  • You need to enroll in the Dependent Daycare FSA during your employer’s Open Enrollment (check with your HR department).
  • If you experience certain life events, like a change in work schedule or you move, you may be able to enroll mid-year or change your contribution amount.
  • There is a maximum contribution amount of $5,000 for this account under IRS regs.

Already enrolled in a Dependent Daycare FSA?  Make sure you use your account by the end of the plan year.  An IRS rule called Use or Lose does not allow Dependent Care funds to rollover from year to year. Be diligent in spending your account balance by the end of the plan year.  Your plan may also offer a grace period – an employer provision that gives you two and a half months after the end of the plan year to incur eligible expenses. Check with your employer to see if your plan offers one.

Whether you’re a first time participant, or a regular FSA account holder, the tax savings you receive with an FSA can be pretty significant. Participating gives you the chance to save and put more money in your pocket!


Pro Tip: Do you participate in a Health FSA too?  Consider stocking up on essential summer care products at FSA Store, an online provider of exclusive pre-approved, discounted FSA eligible expenses.  Experience great savings on sun care, first aid kits and more.

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