{"id":20136,"date":"2026-03-27T12:29:43","date_gmt":"2026-03-27T16:29:43","guid":{"rendered":"https:\/\/gtm.com\/household\/?p=20136"},"modified":"2026-04-07T12:03:21","modified_gmt":"2026-04-07T16:03:21","slug":"dependent-care-fsa","status":"publish","type":"post","link":"https:\/\/gtm.com\/household\/dependent-care-fsa\/","title":{"rendered":"How to Use a Dependent Care FSA When Paying a Nanny [Updated for 2026]"},"content":{"rendered":"
\"dependent

Another advantage of paying your nanny legally? You can use a Dependent Care FSA – offered through your employer – to get tax-free reimbursements on a portion of your nanny’s wages. Here’s how they work when you’re paying a nanny.<\/p><\/div>\n

There are many reasons to pay your nanny legally<\/a>. While you can avoid hefty fines and penalties for non-compliance by paying \u201con the books\u201d and attract high-quality candidates to your job, you can also take advantage of tax savings through a Dependent Care Flexible Spending Account (FSA).<\/p>\n

What is a Dependent Care FSA?<\/h2>\n

A Dependent Care FSA, sometimes called a Dependent Care Assistance Plan or DCAP, is a pre-tax benefit account offered by your employer and used to pay for qualified, out-of-pocket dependent care expenses like your nanny\u2019s wages.<\/p>\n

It’s an easy way to save money while enjoying the benefits of having an in-home childcare professional looking after your children.<\/p>\n

Your child must be under the age of 13 for you to use a Dependent Care FSA for their care expenses. These expenses must be work-related, meaning you and your spouse must be working, looking for work, or attending school full-time.<\/p>\n

You\u2019ll pay your dependent care costs directly and then apply for reimbursement.<\/p>\n

How a Dependent Care FSA saves you money<\/h2>\n

By putting money into a Dependent Care FSA, you’ll reduce your overall tax obligation as funds are withdrawn from your pay and placed into your account before taxes are deducted. It lowers your taxable income (both for income and FICA taxes), so you end up paying less in taxes.<\/p>\n

How much you can save in taxes depends on your tax bracket<\/a> and your state and\/or local income tax rates.<\/p>\n

Getting started with a Dependent Care FSA<\/h2>\n

First, your employer must offer a Dependent Care FSA. Check with your benefits administrator or human resources department to see if this type of FSA is available to you.<\/p>\n

You must enroll in the Dependent Care FSA prior to the start of the plan year during your employer\u2019s open enrollment period. Certain life events, such as marriage, divorce, legal separation, the birth or adoption of a child, and a change in tax dependents, may allow special mid-year enrollment.<\/p>\n

You\u2019ll then authorize your employer to withhold a set amount of money from your paycheck each pay period. These funds are deposited into your Dependent Care FSA. Again, the money deducted from your pay is pre-tax.<\/p>\n

You can contribute a maximum of $7,500 to a Dependent Care FSA as an individual or as a married couple filing a joint tax return. The limit is $3,750 for a married person filing separately. Even if you and your spouse have access to separate Dependent Care FSAs through your employers, your combined contribution limit is $7,500.<\/p>\n

These are the 2026 rates, which reflect the increases included in the One Big Beautiful Bill Act. The previous limit was $5,000.<\/p>\n

Employers are not required<\/em> to adopt this new limit. They can voluntarily do so. Check with your human resources department to confirm if your company has adopted the new limit for the 2026 plan year.<\/p>\n

Dependent Care FSA reimbursements<\/h2>\n

Now that you have your Dependent Care FSA up and running and are enjoying the tax-free benefits, it\u2019s time to get reimbursed for your dependent care expenses.<\/p>\n

You\u2019ll likely need to complete a claim form provided by your employer and provide receipts or proof of payments. You may need to include:<\/p>\n