Dependent-Care Flexible Spending Accounts Aren't Just for Kids' Expenses
You can use the money tax-free to cover care for dependents of all ages while you work.
Can I use money from my employer's dependent-care flexible spending account to pay for adult day care for my elderly mother, or is the account just for child care?
The dependent-care FSA isn't just for children. You can also use the money tax-free to cover care for other dependents while you work. To qualify, the person must live with you. Plus, either he or she must be considered your dependent for tax purposes or you must provide more than 50% of his or her support during the year. He or she must also be physically or mentally incapable of self-care, which the IRS defines as someone who cannot dress, clean or feed themselves because of physical or mental impairments, as well as people who must have constant attention to prevent them from injuring themselves.
To qualify, the care must be provided so you and your spouse can work (one of you can be a full-time student), unless the eligible dependent is your spouse.
You and your spouse can contribute a total of up to $5,000 annually to a dependent-care FSA. The money escapes federal income taxes as well as Social Security and Medicare taxes; it may also avoid state income taxes.
For more information about the dependent-care FSA rules, including a detailed description of eligible dependents, see the Dependent Care FSA page from WageWorks, which administers employer FSA programs.
If you don't have a dependent-care FSA at work, your expenses may be eligible for the dependent-care tax credit. Up to $3,000 for one qualifying individual or $6,000 for two or more (which can include children under 13 as well as eligible adult dependents) qualifies for the write-off. As with the dependent-care FSA, both you and your spouse must have earned income from a job, unless one is a full-time student (or is the eligible person who is receiving care). The credit is worth 20% to 35% of caregiving expenses, depending on your income. For example, it’s worth 20% of the eligible expenses if your adjusted gross income is more than $43,000. For more information, see IRS Publication 503, Child and Dependent Care Expenses.
Even if you've used the maximum $5,000 from a dependent-care FSA at work, up to $1,000 in additional care expenses could still qualify for the dependent-care credit if you pay for care for two or more eligible people (such as a child under 13 and an elderly parent). See Claiming the Dependent-Care Tax Credit.