Dependent Care Reimbursement Account

You can use the Dependent Care Reimbursement Account for the care of qualified dependents so that you (and your spouse if you are married) can work. Qualifying dependents include:

• Children under age 13 you claim as dependents on your tax return.
• Anyone age 13 or older who lives with you at least eight hours a day and needs supervised care, such as an elderly parent or a disabled child or spouse.

You may set aside as much as $5,000 in an account for 2008 to cover eligible expenses during the year. Expenses must be required so you and your spouse can work, or so you can work full-time if your spouse is a full-time student or disabled.

See IRS Publication 503 for information about eligible expenses. The amount you can set aside may be different based on your tax status.

Your contributions come out of your check in equal installments each pay period. Minimum annual deduction amount for the Dependent Care Reimbursement Account is $60.

Dependent Care Reimbursement Account vs. Dependent Care Tax Credit

The federal government offers a dependent care tax credit for your day care expenses - and you can't get the tax benefit of both the reimbursement account and the tax credit for the same expenses.

Think about what fits your situation best - the flexible spending account or the dependent care tax credit provided by federal law. Keep in mind that you cannot take the tax credit for any amounts that are reimbursed through the Dependent Care Reimbursement Account. In some cases, the tax credit may provide more savings than an FSA.

Use the Choice Toolkit to help you decide whether this account makes sense for you.