Can I Use Dependent Care FSA for Private School?

A Dependent Care Flexible Spending Account (DCFSA) offers a valuable way to manage certain family care expenses with tax advantages. This type of account allows individuals to set aside pre-tax money from their salary to cover eligible dependent care costs. The primary objective of a DCFSA is to help taxpayers pay for care that enables them to work or actively seek employment.

Understanding Dependent Care FSAs

A Dependent Care Flexible Spending Account (DCFSA) is an employer-sponsored benefit designed to help employees pay for qualifying dependent care expenses with pre-tax dollars. Contributions are not subject to federal income, Social Security, or Medicare taxes, leading to significant tax savings. To participate, an individual’s employer must offer a DCFSA as part of their benefits package.

Funds can be used for the care of a qualifying dependent, typically a child under 13. This also covers expenses for a spouse or other tax dependent of any age who is physically or mentally unable to care for themselves and lives with the taxpayer for over half the year. For 2024 and 2025, the maximum contribution is $5,000 per household for single individuals or those married filing jointly, or $2,500 if married filing separately.

Eligible Educational Expenses for DCFSA

When considering educational expenses for DCFSA reimbursement, a clear distinction exists between care and education. Private school tuition for children in kindergarten or higher grades is generally not an eligible expense. The Internal Revenue Service (IRS) views these costs as educational rather than necessary for the well-being and protection of the dependent while the parent is working.

However, certain care-related services provided within a school setting may qualify for reimbursement. Before- and after-school care programs can be eligible if they are separate from the regular academic curriculum and primarily provide supervision. Similarly, summer day camps or comparable programs primarily focused on providing care, even with some educational components, can be covered. The expense must be for the dependent’s care, enabling the taxpayer to work or seek employment.

Documentation and Reimbursement

Claiming reimbursement from a DCFSA requires meticulous record-keeping to ensure compliance with IRS regulations. When submitting a claim, individuals must provide specific documentation that verifies the eligibility of the expense. This typically includes a detailed receipt or invoice from the care provider. The documentation should clearly state the type of service provided, the exact dates the service was rendered, the name of the dependent who received the care, and the amount paid.

Additionally, the care provider’s Taxpayer Identification Number (TIN), which is often their Social Security Number (SSN) if an individual, must be included. Claims are generally submitted to the FSA administrator through an online portal, mail, or fax. It is important to note the “use-it-or-lose-it” rule, where funds not used by the end of the plan year are typically forfeited. Some DCFSA plans may offer a grace period, usually an additional 2.5 months into the following year, to incur eligible expenses, but carryovers of unused funds are generally not permitted for DCFSAs.

Maximizing Your DCFSA Benefits

Effectively utilizing your DCFSA requires careful planning and adherence to established guidelines. A key strategy involves accurately estimating anticipated eligible dependent care expenses for the upcoming plan year before deciding on your contribution amount. This helps prevent over-contributing and risking forfeiture of unused funds under the “use-it-or-lose-it” rule.

Maintaining records of all dependent care expenses is important. Keep all receipts, invoices, and statements that detail the services, dates, costs, and provider information. Confirming the eligibility of specific care arrangements with your FSA administrator before incurring expenses can prevent issues. Understanding the IRS definition of a “qualifying person” and “qualifying care” ensures alignment with the account’s intended use, maximizing tax-advantaged savings.