Can You Use Dependent Care FSA to Pay a Family Member?

Using a Dependent Care Flexible Spending Account (FSA) to pay a family member for childcare is permissible, but it operates under a specific set of Internal Revenue Service (IRS) regulations. To ensure the payments are eligible for tax-free reimbursement, you must pay careful attention to who can be paid, the associated tax duties, and the documentation your FSA administrator will demand.

IRS Rules for Paying a Family Member

The IRS establishes clear boundaries on which family members can be paid for dependent care services using FSA funds. You cannot use your FSA to pay your spouse, the parent of your qualifying child, or your own child if they are under the age of 19 at the end of the tax year.

Another restriction involves any individual you or your spouse can claim as a dependent on your tax return. If a family member, such as a parent who lives with you, qualifies as your tax dependent, you cannot pay them with FSA funds for childcare.

Payments to other relatives like a grandparent, aunt, uncle, or an adult child who is 19 or older and not your dependent are allowed. For the expense to qualify, the care must be provided so that you and your spouse can work or look for work.

Tax and Employment Obligations for the Caregiver

When you pay a family member for childcare, those payments represent taxable income that the caregiver must report on their own tax return.

A consideration is whether your family member qualifies as a “household employee.” If you pay a relative more than a certain amount in a calendar year, you may be classified as a household employer. For 2025, this threshold is $2,800. Exceeding this amount means you are responsible for withholding and paying Social Security and Medicare taxes, often called “nanny taxes.” These taxes total 15.3%, with 7.65% paid by the employer and 7.65% paid by the employee, which you withhold from their pay.

If you are a household employer, you must report these taxes to the IRS by filing Schedule H, Household Employment Taxes, with your annual Form 1040. You may also have obligations for federal and state unemployment taxes if payments in any calendar quarter exceed $1,000.

Required Documentation for FSA Reimbursement

A requirement for reimbursement is providing your caregiver’s Taxpayer Identification Number (TIN). For an individual, this is their Social Security Number (SSN), but it could also be an Individual Taxpayer Identification Number (ITIN) or an Employer Identification Number (EIN).

The standard method for collecting this is IRS Form W-10, Dependent Care Provider’s Identification and Certification. You should ask your family member to complete this form, which you keep for your records. The information is used to complete your FSA claim and Form 2441 with your year-end tax return.

In addition to the provider’s TIN, each claim must have a receipt or statement that includes:

• Dates of service
• The name and age of the dependent receiving care
• The full amount paid for the services
• The caregiver’s name and address

Some FSA administrators may accept a signed claim form with this information instead of separate receipts, but detailed invoices from your family member are the most reliable practice.

The Reimbursement Process

Once you have the necessary documentation, you can file a claim. Most FSA administrators offer several submission methods, including uploading documents to an online portal or using a mobile app. Submitting claims via mail or fax is also an available alternative.

After submission, the FSA administrator will review the documentation. You can typically track the claim’s status through the online portal. Upon approval, the administrator will issue your reimbursement.

Payments are generally made through direct deposit or by a paper check. The processing time often takes between five to ten business days from submission to payment.