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DCAPs for Employers

Most employers struggle with the desire to offer benefits that protect their employees, while needing to manage costs. With a Dependent Care Assistance Program, you give your employees the security of an account that can help them pay for work related dependent care expenses, while reducing their taxable income. And in the end, that helps your company’s bottom line.

Overview

A DCAP can save money for you and your employees: When an employee contributes to a DCAP with pre-tax dollars (through automatic payroll deductions that you allow), they reduce their taxable income. Less taxable income for your employees means less payroll taxes for you.

Eligible expenses

This account allows your employees to pay for day care expenses for children under the age of 13 and/or other dependents incapable of self-care so your employees can work

Use a Dependent Care FSA to pay for:

  • Licensed day care facilities
  • Preschool programs
  • After-school programs
  • In-home child and dependent care services
  • Elder care  (dependent care expenses for tax dependents over the age of 13 require proof of medical necessity)
  • Special day camp expenses

your employees cannot use your Dependent Care FSA to pay for:

  • Overnight camp
  • Kindergarten tuition
  • Lunches and food items
  • Education programs
  • Activity fees

Dependents over the age of 13

There are times when your employees' tax dependent is over the age of 13 and because of a medical reason, requires day care so your employees can work. The IRS allows reimbursement from the account for these expenses when the following requirements are met:

  • The dependent receiving the care is unable to provide the care themselves due to a physical or mental disability. A letter of medical necessity from a qualified medical professional is required to show there is a medical need for the care.
  • They live in the home more than 8 hours a day
  • They can be claimed as the member’s tax dependent
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