The Defense Department offers a dependent care flexible spending account to help families pay for dependent care expenses. This benefit is available to:
Service members enroll and elect to have a portion of their paycheck set aside in a benefit account on FSAFEDS.gov. Each month, pay is deducted from your paycheck prior to taxes being taken out and placed in your DCFSA. The funds can be used to pay for eligible dependent care services, such as preschool, summer day camp, before- or after-school programs and child or adult day care. Service members may contribute up to $5,000 per household per year to their DCFSA ($2,500 if married filing separate tax returns).
A DCFSA can benefit families in a number of ways:
When you sign up for a dependent care flexible spending account, you elect to have a portion of your salary deducted before taxes are taken out. This means the money you contribute is not subject to federal income tax, state income tax (in most states) or Social Security and Medicare taxes. This also lowers your taxable income. For example, if your annual salary is $50,000 and you contribute $5,000 to a DCFSA, you will only be taxed on $45,000. This can lower the amount of income tax you owe.
Dependent care services, such as day care, preschool or after-school care, can be significant. By using a DCFSA, you can allocate pretax dollars toward these expenses, effectively reducing out-of-pocket costs. This can make quality care more affordable and help families manage their budgets.
Dependent care flexible spending account contributions are deducted automatically from a service member’s paycheck before taxes, making it a convenient way to set aside funds for dependent care expenses. Families can plan and budget for these expenses by contributing a specific amount to the DCFSA each pay period.
To qualify for a DCFSA, you must have a dependent under age 13 or who is mentally or physically unable to take care of themselves, regardless of their age. You must also be a service member in the regular (active) component or active Guard and reserve on Title 10 orders.
Enroll online at FSAFEDS.gov during the annual federal benefits open season from mid-November through mid-December. You can enroll outside of open season if you have a qualifying life event, such as PCS or the birth/adoption of a child.
DCFSA funds are available to you through your payroll deductions, so, for example, your January contribution will be available to spend in February. You will not have access to your full election amount at the beginning of the year.
DCFSA funds don’t roll over into the next year, so you’ll lose any money you don’t spend on eligible dependent care expenses. However, you will have until March 15 after the end of the plan year to incur eligible expenses and until April 30 to file claims for reimbursement from your DCSFA.
Enroll online at FSAFEDS.gov during the annual federal benefits open season from mid-November through mid-December. You can enroll outside of open season if you have a qualifying life event, such as PCS or the birth/adoption of a child.
Connect with a DOD personal financial professional or MilTax consultant for a free consultation on how the DCFSA benefit can affect your family’s financial and tax situation.
Visit FSAFEDS for more information or to enroll in a DCFSA.
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