Maximize Your Tax Savings with Dependent Care Assistance Programs

Many employers offer a Dependent Care Assistance Program (DCAP) that lets you set aside pre-tax dollars to pay eligible dependent care expenses. This article highlights dependent care benefits and how to make the most of them. 

Making the most of DCAP 

If you’re balancing work and caregiving responsibilities, a DCAP can help ease the financial burden. Also known as a dependent care flexible spending account, a DCAP allows you to set aside pre-tax dollars to pay eligible dependent care expenses — offering valuable tax savings for working families. 

Here’s what to know: 

• Pre-tax savings: Contributions reduce your taxable income, which can lower your overall tax bill. 

• Qualified expenses: Eligible costs may include day care, preschool, after-school programs and adult day care for dependents who require supervision. 

• Who qualifies: Care must be provided for children under age 13 or for dependents who are physically or mentally incapable of self-care. 

• Annual contribution limits: The IRS sets limits on how much you can contribute each year — it’s important to check current thresholds. 

• Use-it-or-lose-it: Most plans require funds to be used within the plan year, so careful planning is key. 

By understanding how DCAPs work, you can maximize your benefits and reduce the out-of-pocket cost of essential care. 

Questions? 

Contact TruePlan! Our team of advisors can help you with questions within the scope of employee benefits.