Understanding Dependent Care Reimbursement Accounts
Dependent Care Reimbursement Accounts assist you in paying for qualified dependent care. With it, you can focus on your job instead of worrying about your kids or elderly dependent parents. Consider taking advantage of this employee benefit.
What are Dependent Care Reimbursement Accounts?
Dependent care reimbursement accounts pay for dependent care while you're at work. Dependents are typically defined as children under the age of 12, a disabled spouse or dependent parents.
Depending on your tax filing status, you can contribute up to $6,000 annually to a dependent care reimbursement account. The money deposited into your dependent care reimbursement account is not refundable and does not carry over to the next year, so you'll lose any funds you do not use.
What Do Dependent Care Reimbursement Accounts Cover?
You may only use funds in your dependent care reimbursement account for daycare expenses. The money cannot be used for any other expense even if it is related to your dependent's care. Eligible expenses include:
- Childcare before and after school for kids 13 and younger
- In-home care as long as the provider is not your dependent
- Home or daycare for disabled dependents who live with you at least eight hours a day
- Licensed child and adult daycare providers
- Registration fees associated with qualified dependent care
- Summer day camp for kids 13 and younger
Dependent care reimbursement accounts do not pay for these expenses.
- Care not related to work
- Educational Fees/Tuition
- Food, clothing
- Overnight camps
- Payments to a qualified individual's parent or spouse
- Transportation expenses you incur
Keep all receipts to prove that you used the funds for eligible expenses.
Why enroll in a Dependent Care Reimbursement Account?
- Perform better at work.
Caring for your child or dependent is your first priority, and it's difficult to concentrate at work when your child is sick or your elderly parent is home alone. A dependent care reimbursement account ensures your dependents are taken care of as you work. The account can actually improve your work performance since it decreases tardiness, absenteeism and distraction while increasing morale and productivity.
- Reduce your tax burden.
You fund your dependent care reimbursement account with pre-tax paycheck deductions, which means you pay fewer taxes.
- Balance your budget.
Paying for childcare or elder care can be expensive and could strain your budget. Make regular contributions to your dependent care reimbursement account and keep your budget balanced.
Dependent care reimbursement accounts offer numerous benefits. They're an important asset for your family, so consider opening an account. Your Human Resources manager or insurance agent will provide additional information.