Someone please explain..

theseaword

Dependent Care FSA accounts, please!  I read an overview and I'm still not understanding the logistics. We're going the daycare route so I hear it's a good thing, but...don't get it. Thanks!

LoveBug0516

Glad you posted this. I would like to learn more about it as well, especially since open enrollment starts in October.

NikMck06

Basically, you elect to have a set amount of money come out of each paycheck pre-tax.  That money goes into an FSA account (think of it as a savings acct - but does not earn interest).  Then you get reimbursed out of that account once per month based on your daycare expenses that you submit.  

Bottom line is you are saving tax dollars... you can elect to contribute (set aside) up to $5,000 per year, which we all know is not nearly enough to cover an entire year of daycare expenses!  But anything is better than nothing, right

theseaword

Thanks! So do you start putting money in it before you need it, so you have funds built up to draw from?

emcheerumr

You can change your elections and start an FSA account up to 30 days after the birth of your child (a qualifying event).  So either you can space out the deductions from your paycheck all year or you can have a larger amount taken out the remaining months of the year.

It is important to calculate the amount that childcare will cost you, especially because you will not be paying for a complete year.  Any amount that you don't submit receipts for, you do not get back.

It works a lot like a heathcare FSA except you can not be reimbursed until you have incurred the expense and have put money in to the account.

Mrs.DeliaMarieP

I elect to have $5000 per year taken out of my pay check pre-tax- $192 per paycheck.

Then, once there is some money in that Dependent care account, I have the daycare provider fill out a form which I fax to the Dependent Care company, and they reimburse me that amount back into my checking account.  So basically, I pay for daycare tax free.

If I do not spend $5000 in daycare in that year, then I lose the remainder, so I made sure that I was definitely going to spend that much before I made that election amount.

I will not be able to claim the dependent care on my taxes this year because of the Dependent Care account, however I will save more in taxes this way than I would by claiming it on my regular taxes.