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