|
|
Description
The dependent day care account reimburses dependent day care expenses necessary while you (and your
spouse, if you are married) are working on a full-time basis or attending school full-time. Typically this
includes day care expenses for children, but you can also use this account to reimburse day care expenses
for other dependents, such as a spouse, parents or grandparents who cannot care for themselves. Your dependent
must live in your home at least 8 hours a day.
Participation
You may elect a dependent day care spending account during the Annual Open Enrollment. The amount that you
contribute cannot be changed during the plan year unless you experience a qualified change in status.
If you do not enroll during open enrollment, you will not be able to enroll until next year’s open enrollment
unless you experience a qualified change in status.
Contributions
The minimum that you can contribute is $10 a month.
The maximum that you can contribute is $416.67 a month ($5000 per plan year) or $625 a month for a less than
annual faculty member.
Special Considerations
By IRS rules, married individuals who file separate tax returns are limited to a $2,500 contribution
annually. You may contribute up to $5,000 if you are married and file a joint tax return, provided
both you and your spouse each earn more than $5,000 annually. If one of you earns less than $5,000
during the year, you are limited to a maximum spending account contribution equal to the salary of the
lowest-earning spouse.
Time spent by a student spouse in educational endeavors is considered working for the purposes of opening
an FSA. Volunteer work does not qualify.
If both you and your spouse work at the University of Pittsburgh, you must coordinate your dependent day
care enrollments so that the two of you together stay within the $5,000 annual maximum.
You may only claim dependent care expenses on children age 12 and younger, unless the dependent is disabled.
Tax Credit Versus Spending Account
Is it more advantageous for you to take the tax credit for dependent care expenses OR to pay for these expenses
through a dependent care FSA? You cannot claim the same expenses both ways.
Tax Credit: As income increases, the tax credit becomes less valuable. You may claim up to $2,400 in dependent
day care expenses for one dependent or $4,800 for two or more dependents. Your actual tax savings, however,
depends upon your income. For example, a family with taxable income of $10,000 is eligible for a 30 percent
credit, giving them a $750 savings on $2,500 of expense. Meanwhile, a family with taxable income of $28,000 would
receive only 20 percent credit for the same expense, giving them a $500 savings on $2,500 of expense. Remember,
taxable income is your income after you have subtracted exemptions and deductions.
Dependent Care FSA: Reimbursement of dependent care expenses through an FSA becomes more valuable as family
income increases. The crossover income level at which the advantages of both methods are about equal
(in terms of federal income and Social Security taxes) occurs at $24,000 of adjusted gross income. Use this
general rule as a guideline only!
Eligible Expenses
Examples include:
- Daycare
- After-school care
- Elder care
- Summer day camp
For a more complete listing of eligible expenses, click here.
Reimbursement
After receiving and paying and paying for dependent care services, submit a claim online and fax the original bill
and proof of payment to EBDS. Expenses must be incurred within the current plan year. The requested amount will be
paid from the participant’s reimbursement account as long as it does not exceed the dollar amount that is in the
account when the request is made.
You can now have your reimbursement deposited directly into your bank account. Click here for a direct deposit form.
“Use It or Lose It”
Careful planning is required.
Positive changes to regulations announced. (.pdf)
FSAs must comply with federal law. There is a "use it or lose it" provision. What is not used for services and expenses
incurred during a Plan Year or the 2 1/2 additional months (e.g. until September 15, 2006 for the plan year that ended June 30, 2006)
and not claimed by the end of the grace period, are forfeited and remains in trust to be used only for operating costs
of the FSA program.
Note: STATUS OF UNUSED FUNDS IF INCOMPLETE PARTICIPATION IN PLAN YEAR
Expenses during the Plan Year are not eligible if incurred after termination,
suspension or for a leave, or cancellation for a family status change. If unused funds and expenses are incurred after
such an event, post-employment or post-participation access is available through continuation of the account on an after
tax basis under COBRA. Termination of employment is distinguished from suspension for a leave, family status change, or
other employment circumstance for which other “make-up” contributions may be made to activate participation for access
funds.
|
|
|
|
|
