Core Insights - The dependent care flexible spending account (DCFSA) is a tax-advantaged account designed for tax-free savings on adult and childcare expenses, requiring careful planning and adherence to specific rules [1] Group 1: DCFSA Functionality - DCFSA is included in many employer benefits packages, allowing employees to contribute a portion of their paycheck during open enrollment or qualifying life events [2] - Contributions to a DCFSA are made with pre-tax dollars, which can significantly reduce taxable income; for a married couple in the 22% federal tax bracket, potential tax savings could exceed $1,000 [3] - The annual contribution limit for DCFSA is set at $5,000 for 2024 and 2025, increasing to $7,500 starting in 2026 [4][6] Group 2: Fund Management - Unused DCFSA funds typically expire at the end of the calendar year unless the employer offers a grace period of up to 2.5 months for incurring and claiming eligible expenses [5][14] - Employees must estimate their annual expenses ahead of time, as contributions are set during open enrollment, and any unused funds will be forfeited [7] Group 3: Eligible Expenses - Eligible expenses for DCFSA include costs for caring for a child under 13 or a dependent who cannot care for themselves, provided the care allows the employee to work or seek employment [9][15] - Examples of eligible expenses include daycare, preschool, babysitting, and before- or after-school programs, while private school tuition and overnight camps are not eligible [11][17] Group 4: Tax Benefits - Households can combine DCFSA with other tax benefits, such as the child tax credit, which offers up to $2,200 per child, and the child and dependent care credit, which provides up to $3,000 for one dependent or $6,000 for two or more dependents [18][19]