To help you pay for dependent care, the Department of Defense is implementing Dependent Care Flexible Spending Accounts (DCFSA). This benefit supports families with certain expenses, including childcare, preschool, elder care, summer camp, and others.
Who Is Eligible to Enroll in DCFSA?
Department of Defense civilians, regular (active) component servicemembers, and Active Guard Reserve members on Title 10 orders who have dependents are now eligible to enroll in a pre-tax DCFSA to pay for eligible dependent care services such as child or adult day care.
Are There Tax Benefits?
Because contributions go straight from your paycheck to your DCFSA before taxes are deducted, less of your income is subject to taxation and you keep more of your paycheck.
When Can You Enroll in DCFSA?
You can enroll in a DCFSA during Federal Benefits Open Season, (typically mid-November through mid-December each year), or when you have a Qualifying Life Event (QLE) such as the birth or adoption of a child, divorce, or relocation. Once you’ve enrolled, your DCFSA becomes effective January 1 of the next calendar year.
Eligibility Requirements
There are no age restrictions for enrollment. To be eligible, both spouses must have earned income, and you must have an eligible dependent and use eligible dependent care services to allow you and your spouse (if applicable) to work, look for work, or attend school full-time. Also, your dependent must be claimed on your tax return for the year you are enrolling in DCFSA. If your spouse is a full-time student or not able to care for themselves, they are treated as having earned income of $250 per month for one DCFSA qualifying dependent, and $500 per month if there are two or more qualifying dependents.
What Kinds of Eligible Expenses Can Be Paid for Using DCFSA?
You will be able to use your new DCFSA to pay for daycare, preschool and after school care, plus day camps during school holidays for children under age 13 who are claimed as dependents for tax purposes. You will not be able to use these funds to pay for school tuition expenses for kindergarten and above, care provided by another one of your dependents, nighttime babysitting (unless you work nights when the expenses occur), or overnight camps.
Additionally, you can use the DCFSA to pay for certain types of care for a spouse or dependent of any age who is physically or mentally incapable of self-care.
To provide an overview of the Dependent Care Flex Spending Account (DCFSA), Sarah Bumgardner, AAFMAA’s Director of Partnerships and Member Engagement spoke to Amy Marotto, AAFMAA Member Benefits Team Lead. Amy Marotto explained that this benefit uses pre-tax dollars to pay for eligible childcare, preschool tuition, after school care, and other dependent care. She detailed why this is a great benefit, which can provide up to a 30% savings, and also explained how and when eligible servicemembers can enroll. To find out more, watch their discussion below.
How to Access Your DCFSA Funds
To use the funds in your DCFSA, you will need to file a claim. You can either be reimbursed or have the dependent care provider paid directly. The claim must be for eligible dependent care expenses and must be validated with a receipt.
DCFSA allows up to $5,000 of pre-tax earnings per household, per year for eligible dependent care expenses. You have until March 15 of the following year to use the funds. For example, if you enroll in a DCFSA during Open Enrollment November 2023, you will be able to use the funds from January 1, 2024, through March 15, 2025. All claims must be submitted by April 30, 2025, and any funds remaining in the account after this date will be forfeited, so plan carefully!
More Information
A DCFSA may affect eligibility for other tax benefits, so you may need to seek guidance before enrolling. Be sure to consult a financial planner who can provide the insights you need to decide.
You can also learn more from the Office of Financial Readiness (FINRED).
If you have any questions or need our assistance with your military benefits, an AAFMAA Member Benefits Representative can help. Call 888-521-4145, select option 2, then option 2 again; or email [email protected].
This article was originally published November 30, 2023.