Dependent Care Flexible Spending Accounts (DCFSA) are tax-advantaged accounts that let you use tax-free money to pay for eligible dependent care expenses. Millions of Americans use a DCFSA to help defray costs associated with childcare or elder care. A qualifying ”dependent” may be a child under age 13, a disabled spouse, or an older parent in eldercare, among others.

Dependent care flexible spending accounts are only available through an employer.

When it comes to DCFSA expense eligibility, the main rule to keep in mind is that you must spend account funds only on dependent care during your working hours (so that you can work, look for work, or attend school full time). This means that you can’t use your account to pay for childcare during date night.

You can always view the latest IRS contribution limits at this page.

With those preliminaries out of the way: Here are six amazing ways to save with a DCFSA.

#1 Babysitter or nanny

This is the most common question we get each year.

Yes! You can use your DCFSA to pay a babysitter during your working hours. You can use your DCFSA to pay your nanny too.

Per Internal Revenue Service (IRS) rules, the babysitter or nanny can’t be a dependent. So, you can’t pay an older child to babysit a younger child. Additionally, payment needs to be ‘on the table,’ so you’ll need to provide documentation.

Also keep in mind that the IRS has unique rules related to ‘household employees.’ If you use a babysitter regularly or on a full-time basis, they might have to classify as a household employee, which could trigger additional potential tax liabilities.¹

It’s a good idea to consult a tax advisor before making any decisions.

#2 Child daycare, nursery school, and preschool

In many cases, you can pay your childcare provider or preschool directly from your account.

Note that you can only use your DCFSA to pay for preschool until kindergarten. DCFSAs cannot cover private school tuition.

#3 Before and after school programs

Your DCFSA also covers childcare programs before and after school. Keep in mind, however, that these programs cannot be for specific lessons, like piano or dance.

In most cases you can’t use the money to pay for meals or snacks, either. However, if the snacks are part of tuition, then it’s usually eligible.

#4 Registration and/or payment processing fees

Not only can you use your DCFSA to pay for the actual cost of dependent care, but you can also pay the extra fees associated with the cost of that care.

Note, however, that you can only use the money to pay for registration and/or payment processing fees after services have been provided. In other words, you can’t use your DCFSA for preschool application fees or to put down a daycare deposit.

#5 Summer day camp

DCFSAs also cover summer day camp for children under 13 years old. Importantly, overnight summer camps are ineligible, since your DCFSA can only cover childcare expenses during your normal working hours.

#6 Elder daycare

If you claim an elder family member as a dependent on your tax returns, then you can use a DCFSA to pay for their daycare. The daycare can be in-home or at a dedicated elder daycare facility. This could include paying an in-home attendant who assists with daily caregiving functions (e.g., bathing, taking medication, cooking, or just driving to and from the doctor).

Importantly, you can’t use your DCFSA to pay for your dependent’s medical expenses. DCFSA funds also don’t cover nursing home costs.

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