Using Dependent Care Benefits for Day Care Expenses

Some employers offer dependent care benefits to employees. If you receive such benefits, you may be able to exclude all or part of them from your income.

Dependent care benefits include:

• Amounts your employer paid directly to either you or your care provider for the care of your qualifying person while you work.
• The fair market value or care in a day care facility provided or sponsored by your employer.
• Pre-tax contributions you made under a dependent care flexible spending arrangement.

If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. Your employer will be able to tell you whether your benefit plan qualifies.

The amount you can exclude or deduct is limited to the smallest of:

• The total amount of dependent care benefits you received during the year.
• The total amount of qualified expenses you incurred during the year.
• Your earned income.
• Your spouse’s earned income.
• $5,000 ($2,500 if married filing separately).