School’s Out for Summer: Save on Summer Daycare with Your FSA

Summer day care blog post graphic (1)

Summer is in the air (finally!) and many families are settling into new routines, enjoying the perks of summer vacations carefully planned around work schedules and other commitments.  It’s a busy time of year for many, especially for working parents who have to worry about child care while school’s not in session.

Luckily, there’s some financial relief available on summer childcare costs through Dependent Daycare Flexible Spending Accounts (FSAs).   This kind of pre-tax advantage gives you an average of 30% savings on eligible dependent daycare expenses.  Here’s how it works.  When you enroll in a Dependent Care FSA, you choose to contribute a certain dollar amount – pre-tax – into this special designated account.  That total dollar amount is divided by the nuber of pay periods you have in a year, and that amount is deducted from your paycheck, pre-tax, every pay period.  Because you are using pre-tax dollars – money before taxes are deducted – you save approximately 30% when you use this account.  With the high costs of day care, a 30% savings can make a huge impact on your budget.

If you have a child or dependent who attends a summer day camp take advantage of the savings an FSA offers and use this account to pay for those summer day care expenses – as long as they’re under age 13, per IRS rules.  (Overnight camps are not an eligible expense, so the Dependent Care FSA is unable to reimburse for it.)  You can also use this account to pay for other qualifying day care expenses, like nursery schools, adult day care or eldercare for your dependent parents, and day care centers.

Participants in the Dependent Daycare FSA need to enroll in the account during their employer’s Open Enrollment period (check with your HR department to see when yours may be), unless they experience an event that allows them to enroll mid-plan year, like a change in work schedule or moving.  IRS guidelines impose a maximum contribution amount of $5,000 for this account.

Already enrolled in a Dependent Daycare FSA?  Make sure you use your account by the end of the plan year.  An IRS rule known as Use or Lose does not allow Dependent Care funds to rollover from year to year, so be diligent in spending your account balance by the end of the plan year.  Your plan may offer a grace period, which allows you to use leftover funds on eligible expenses during the first 2 ½ months of the following plan year.  Check with your employer to see if your plan has this provision in place.

Whether you’re a first time participant, or a regular FSA account holder, the tax savings you receive with an FSA can be pretty significant – and it gives you the chance to put more money in your pocket!


Do you participate in a Health FSA, too?  Consider stocking up on essential summer care products at FSA Store, an online provider of exclusive pre-approved, discounted FSA eligible expenses.  Experience great savings on sun care, first aid kits and more.

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