Daycare: HSA Eligibility

Daycare expenses are not eligible for reimbursement with flexible spending accounts (FSA), health savings accounts (HSA), health reimbursement arrangements (HRA) and limited care flexible spending accounts (LCFSA). However, the cost of daycare is a qualified eligible expense under a dependent care FSA (DCFSA).

What is daycare?

Daycare and other forms of childcare are significant yearly expenses, and families have the option of pursuing a dependent care flexible spending account (DCFSA) or opting for the child care tax credit for assistance in covering these care expenses. Because flexible spending accounts (FSA), health savings accounts (HSA) and other forms of consumer spending accounts exclusively cover products and services with a legitimate medical purpose, the DCFSA and other tax credits are the only options available for workers looking to cut the cost of their daycare expenses.

Daycare and Dependent Care Flexible Spending Accounts

A flexible spending account for dependent care is a unique employee benefit that covers expenses related to the care of children, a disabled spouse, elderly parent or other dependent incapable of self-care. Money that is set aside in a DCFSA is deducted from an employee's gross salary before income taxes, and this assistance is contingent on the employee or his/her spouse working full-time, looking for work or attending school full-time. Daycare expenses are only eligible for reimbursement through a DCFSA if the child is under the age of 13 or mentally or physically incapable of self-care.

Daycare expenses eligible for reimbursement through a DCFSA fall under a wide umbrella of potential care options, including fees for licensed day care or adult care facilities, amounts paid for services provided in outside the home (such as babysitters or nursery schools) or a dependent care provider such as an au pair. Other eligible DCFSA expenses include summer day camp for children under 13, before and after school care programs, payment to relatives (aged 19 or older and not listed as a dependent) who care for a qualified dependent and payment to a housekeeper whose duties also include dependent day care.

Eligibility Table

Flexible Spending Account (FSA) Limited Care FSA Dependent Care FSA Health Savings Account (HSA) Health Reimbursement Account (HRA)

Eligible

Eligible with Rx

Eligible with LMN

Not Eligible

 


AZ-PROD-WEB01 11/19/2017 6:40:53 AM