A Dependent Care FSA is a pre-tax benefit account used to pay for eligible dependent care services for individuals less than 13 years old and other qualifying disabled individuals.  These include paying for expenses such as daycare, babysitting, preschool, summer day camp, before or after school programs, and child or adult daycare. It's a smart, simple way to save money while taking care of your dependent loved ones so you can continue to work.

Benefits of a Dependent Care FSA allow you, as an employee, to save an average of 30 percent on dependent care services and reduce your overall tax burden - since funds are withdrawn from your paycheck for deposit into your account before taxes are deducted.

Employees can contribute up to $5,000 to the dependent care FSA each calendar year.  The limit is reduced to $2,500 for married individuals filing separately. 

Unfortunately, Congress did not index the $5,000 dependent care FSA yearly contribution to inflation, when it established the cap in 1986.  36 years ago, average childcare cost were $5,000 per year.  Using the Bureau of Labor Statistics' standard CPI inflation calculator, $5,000 in 1986 is roughly equivalent to $12,720 as of December 2021, which is approximately the average yearly cost of childcare for 1 child today.  Using Economic Policy Institute and the US Census Bureau, today's average childcare costs accounts for 10.8% - 23.5% of the average household income, based on US state demographics. 

During 2021, the contribution cap was increased to $10,500, but it was only for the 2021 tax year. Many employers did not implement the increased cap on dependent FSA accounts for 2021 if their open enrollment for benefits did not align with the calendar year as opposed to the fiscal year.

Our country is currently facing a work force shortage, inflation, high childcare costs and the second-slowest decade of population growth since 1790 (when the census was implemented in the US).  Extending the $10,500 FSA contribution limit, or ideally, increasing the dependent care FSA contribution limit to include inflation, will help curb some of these obstacles by allowing individuals to remain in the work force and increase household size. 

Only an act of Congress can modify that $5,000 statutory limit. Please sign this petition to ask Congress to adjust the dependent care FSA limits.