What can be reimbursed from your dependent care account?
Things that are eligible might surprise you
If you’re using a dependent spending account offered as a benefit from your employer, you probably appreciate that the account provides you with a financial edge because dollars are contributed there on a pre-tax basis. If your employer contributes to your account, the advantages extend even further.
Unfortunately, none of these advantages matter if you don’t use all the money in the account. That’s because funding that’s left in your account at the end of a year generally isn’t allowed to be saved until the next year. If you don’t use it, it goes away.
Some of the things that qualify as reimbursable expenses may surprise you. Below are details on some of the main areas of expenses that are considered as eligible for most dependent care accounts. This list is a general guideline. To ensure that your expense is covered, you should contact your human resource department or review your plan’s enrollment guide.
A range of childcare options during the time you’re at work counts
One of the most well-known allowable benefits for dependent care spending accounts is childcare that takes place during the time that parents are working. What many parents don’t realize, however, is this childcare can take a variety of forms. Sure, it can include daycare at formal centers, in a home-based center, through a nanny or AuPair at your house, or through care programs that take place on school grounds. But it can also include other kinds of care options.
Generally speaking, the main qualification for eligible expenses is that it enables parents to be employed because the care takes place during regular working hours.
Do you also need working-hours care during school breaks, school days off, or summer vacations? The fees for this care can be paid for out of your account. Do you have a housekeeper that takes care of your children in addition to other duties? That expense is eligible too. Generally speaking, the main qualification for eligible childcare expenses is that it enables parents to be employed because the care takes place during regular working hours.
Care for older parents or other dependents counts too
Childcare isn’t the only expense that is allowed to be reimbursed through dependent care accounts. If you are caring for a dependent adult, including an elderly or incapacitated parent, this care is also covered.
As with care for children, there are several eligible vehicles for dependent care. The services of adult daycare centers generally qualify. So do non-medically based services administered by an in-home provider that you pay for out of pocket. The qualifying factor for these expenses is that the care allows you to be able to work.
What kinds of things aren’t covered?
As you start to consider what kinds of things may be regarded as reimbursable by your dependent care account, it is helpful to compare them with things that aren’t covered. Expenses that can’t be reimbursed include:
- Childcare or older dependent care expenses that take place during non-working hours
- Fees for classes (like dance lessons, piano lessons, or sports activities) even if they take place during parental working hours.
- Fees for equipment and supplies related to enrichment classes
- Medically-based services for older adults who are dependents or children (consider using medical insurance to help with these costs)
- Fees for activities that take place at school sites. They are typically regarded as separate from school-based childcare services
Again, understanding the kinds of things that are eligible for reimbursement under your account can be tricky. If you’re not sure, don’t hesitate to talk to your company’s human resources department or check with your benefits manual.
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