Let’s face it: Preschool (or any type of child care) can be expensive.

While there’s no research that suggests that language immersion preschools are more expensive than traditional ones, we’ve heard from some mamas, especially in California, that there can be a cost difference. That being said, how do you make preschool, of any type, more affordable? There are a few different ways to save on childcare costs, but one that our family will be experimenting with this coming year is the Dependent Care FSA (also known as the DCFSA).

Annual benefits enrollment for my full-time, corporate job ended this past Friday, and of course I mistakenly waited until the last moment to elect the coming year’s benefits. Putting off researching and deciding my family’s benefits wasn’t smart, but it did force me to give myself a mini crash course, over my lunch break, on all things related to the Dependent Care FSA. In this post, I’ll share what I learned.

Disclaimer: None of the information in this blog post should be interpreted or relied upon as financial advice. Please conduct your own research and consult with a financial planner to make the best financial decisions for you and your family.

What is a Dependent Care FSA, and how does it work?

The “FSA” in Dependent Care FSA stands for “flexible spending account.” This type of account allows you to set aside a portion of your paycheck to pay for eligible dependent care expenses. The best part is that the portion that you set aside to pay these expenses is tax free, which means that you ultimately take home more of your paycheck.

If you file a joint tax return with your spouse, you can set aside up to $5,000. Married couples who file separate tax returns can set aside up to $2,500 for each spouse.

Once you’re enrolled in a Dependent Care FSA, your funds are automatically withdrawn from each paycheck, and you can use these funds to pay for your dependent care expenses. You can only use the funds that have been accrued in your account to date.

Who is eligible for a Dependent Care FSA, and what type of care does it cover?

As it relates to children, a Dependent Care FSA includes coverage for children age 13 years and younger for the following types of care (note that this list isn’t necessarily conclusive):

  • Before or after school programs
  • Au Pairs
  • Work-related babysitting
  • Nannies
  • Preschool
  • Summer day camps

Is a Dependent Care FSA worth the hassle?

That’s what I’m seeking to discover this coming year. My husband already said that I’ll be in charge of this project (he’s responsible for several other financial-related tasks within our family). My dad suggested that for our first year of this experiment we only put aside $2,500 and not the full $5,000.

I’m jumping in 100 percent with it, though. I know to save all my receipts, keep good records, and stay on top of the FSA money so that we don’t lose it.

So far, we’ve only ever taken advantage of the child-care credit. Everything I’ve read online, however, indicates that, in my family’s case, the Dependent Care FSA should be more advantageous for us.

We’ll see how this whole thing pans out come tax time!

Do you have experience with a Dependent Care FSA? Leave a comment to let us know how it worked out for you.

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