How to Navigate DCFSA as a Caregiver
This article was written by our social media intern, Jazmyn. This blogpost will be a part of our “Savings Account as a Caregiver” series.
Greetings! I’m Jazmyn, and I’m a new intern here at Mirza. If you’re anything like me, you hear a lot about FSA, HSA, and maybe occasionally even the USA. But, there is another one that you might not be as familiar with, and I am here to help you with that. This is going to be all about the DCFSA and just what in the world it is. (Don’t worry, you don’t have to pretend you know what it is for our sake).
Open enrollment is right around the corner! We want you to have all of the resources you need to get the benefits that are best for you. Choose wisely, well…because you won’t be able to choose again until next year.
At some point in our lives, we’ll all be caregivers. While having kids might not be on your mind right now, it’s always good to know that if you do start a family or need to look after a loved one, there’s a pre-tax benefit that can help you reduce your taxable income while paying for caregiving costs. Caring for anyone, whether it’s a child or an elder in your life is going to require some money, and not everyone just has so much lying around. That’s where a DCFSA comes in.
Not only is it a way to provide money for your family, but it’s also a way to give you the peace of mind and freedom that you deserve. It’s great for families, but it does create some cash restrictions.
A DCFSA (dependent care flexible spending account) allows you to use tax-exempt funds to pay for care expenses that you may incur while at work. If this is something that you’re interested in, we want to make sure that you are prepared and have all of the knowledge and resources available to you. That’s where we come in!
How it works: participants authorize their employers to withhold an agreed amount from their paycheck each pay period to deposit into their account - this means the money used to fund your DCFSA is pretax. But instead of using that money to pay for expenses directly, you pay for those costs out-of-pocket and then apply for reimbursement.
Getting reimbursed for a DCFSA can happen in a few different ways. WageWorks is a site where you can get reimbursed right back into your account. You can use it to also get a check mailed to you if that is easier. The most important part about getting reimbursed is to remember to keep your receipts. When you are submitting claims, that is the key to getting your money back. And we want to make sure that happens!
Using this benefit is helpful for caregivers because it gives them more autonomy. Not only do you have the opportunity to use the money to pay for daycare or other qualified services you need to ensure that your loved one is cared for, but you can still work and live your life while taking care of someone. Just because someone requires extra care doesn’t mean that either of your lives should stop!
Reasons to get a DCFSA:
Get more money from your paycheck in the long run
By contributing pre-tax dollars, you can reduce your taxable income, meaning you pay fewer taxes
Save more on dependent care services
Convenient to pay and be reimbursed
What a DCFSA can be used for:
Daycare (for children and elders)
Babysitter
Pre-school
Before and after school care
There’s a full list here: DCFSA Guide
Things to consider:
The maximum amount of money you can contribute to a DCFSA is $5,000. Once you deposit money into the account, it cannot be returned in cash.
If you don’t use up the funds within the specified time frame (usually a year), you lose those contributions - so make sure every penny you contribute goes towards something!
You can only be reimbursed after the care has taken place; so if you have to pay for summer camp in January, you can’t get reimbursed until the summer.
Eligible dependent care services may include: preschool, summer day camp, before or after-school programs, and child or adult daycare.
These care services must also occur while you’re at work.
If you are divorced, only the custodial parent may use a dependent care FSA.
Your DCFSA does not affect your HSA ability.
Sign up for a DCFSA is limited to the open enrollment period.
There are many benefits when it comes to getting a DCFSA, and also important considerations around how this can affect your household cash flow. Consider what you’ve read in this article and make the best choice for yourself. We’re sure you’ll do the right thing for you!
