Dependent Care Spending Accounts
How does the DCSA compare with the Federal Child and Dependent Care Income Tax Credit?
If you are currently incurring dependent care expenses, you are probably paying for these expenses in after-tax dollars and taking the Federal Child and Dependent Care Income Tax Credit when you file your income taxes. The IRS limits the federal income tax credit to eligible expenses of $3,000 for one dependent and $6,000 for two dependents or more. The DCSA limit is $5,000 regardless of the number of dependents; however you can claim the remaining $1,000 toward the Federal and Dependent Care Income Tax Credit.
Whether you use the federal income tax credit or the Dependent Care Spending Account, you must complete and submit IRS Form 2441 with your annual income tax return. This form provides the IRS with information on your dependent care provider and your dependent care expenses for the tax year.
How much can I contribute to my DCSA?
You may contribute up to $5,000 for the full plan (calendar) year. If you are married and your spouse's employer also offers a Dependent Care Spending Account or both you and your spouse work at MSU, your combined total annual contribution cannot exceed $5,000. If you are married and you file a separate income tax return, contributions cannot exceed $2,500 for each of you, with a $5,000 total maximum. Utilize the DCSA Worksheet to assist with the planning of your DCSA contribution. A listing of the monthly and bi-weekly pay dates can be found at http://www.ctlr.msu.edu/COPayroll. You will need to plan carefully, as the IRS requires any unused money left in your account at the end of the plan year to be forfeited.
How much can I be reimbursed for DCSA?
The total amount of expenses you submit for reimbursement in a plan (calendar) year must not exceed the lesser of your earned income, your spouse's earned income if you are married, or $5,000. For example, if your working spouse earns $4,000 a year, the maximum amount you can be reimbursed is $4,000. If your working spouse earns $20,000, the maximum amount you can be reimbursed is $5,000.
According to IRS regulations, a spouse who is disabled or a full-time student is determined to have an income of $250 per month if you have one dependent (total annual income of $3,000), or $500 per month if you have two dependents or more (total annual income of $6.000). If your spouse is a full-time student and you have one dependent, your maximum reimbursable amount is $3,000; if you have two dependents or more your maximum reimbursable amount is $5,000 plus you can claim the remaining $1,000 toward the Federal and Dependent Care Income Tax Credit.
Please note: If you use the Dependent Care Spending Account, you cannot use the federal income tax credit for the same expenses.
Can I change the amount of money I put in my Dependent Care Spending Account if my dependent care provider changes his/her fees?
Yes, this change qualifies as a life event. Simply complete the Offline EnrollmentChange Form and submit to MSU Human Resources Benefits.
