Does daycare count for HSA?

Asked by: Aliya Schiller  |  Last update: November 9, 2023
Score: 4.2/5 (25 votes)

Child care is not eligible for reimbursement with a flexible spending account (FSA), health savings account (HSA), health reimbursement arrangement (HRA) and limited-purpose flexible spending account (LPFSA). However, child care is eligible for reimbursement with a dependent care flexible spending account (DCFSA).

Do HSAs allow dependent care expenses?

Although there are some similarities between FSAs and HSAs—like the ability to save pre-tax money and take a tax deduction—there is no dependent care HSA. Unfortunately, this means you can't use your HSA for any type of dependent care expenses—and there is no HSA for daycare.

Can HSA be used for child education?

Special schools and education are eligible for reimbursement with a Letter of Medical Necessity with a flexible spending account (FSA), health savings account (HSA), or a health reimbursement arrangement (HRA).

What is the maximum dependent care HSA contribution?

The Dependent Care FSA (DCFSA) maximum annual contribution limit did not change for 2023. It remains at $5,000 per household or $2,500 if married, filing separately.

What is dependent care HSA?

A Dependent Care Flexible Spending Account (DC-FSA) covers qualified daycare expenses for children younger than age 13 and adult dependents who are incapable of caring for themselves.

Dependent Care FSA Explained | How to Save Taxes on Childcare

18 related questions found

How do I pay my daycare with FSA?

How do I use my Dependent Care FSA funds to pay for dependent care expenses? Pay your provider with your preferred payment method and save your receipts or documentation. You can only be reimbursed for care that has already been received, so wait until the period of care you've paid for has passed.

Can I pay a babysitter with FSA?

Can you hire a babysitter using Dependent Care FSA funds? In short, yes! A Dependent Care FSA allows you to set aside tax-free dollars from your paycheck to pay for eligible child or adult dependent care expenses.

Can you use HSA for Apple Watch?

Unfortunately the answer to this question is usually no. This is because according to the IRS, fitness trackers are used to promote what the IRS terms “general health”. Expenses under this general health definition are not considered HSA eligible expenses.

Do I make too much for a dependent care FSA?

Maximum Annual Dependent Care FSA Contribution Limits

If your tax filing status is Single, your annual limit is: $5,000 if your 2022 earnings were less than $135,000; however, your contributions may not be in excess of your earned income for the plan year. $3,600 if your 2022 earnings were $135,000 or more.

What is included in dependent care expenses?

A Dependent Care FSA (DCFSA) is a pre-tax benefit account used to pay for eligible dependent care services, such as 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 loved ones so that you can continue to work.

Can you have an HSA and FSA for childcare?

A Dependent Care FSA does not affect your eligibility for an HSA. You can have both accounts without creating any conflict of benefits.

Can I use my HSA for dependents not on my plan?

Can my HSA be Used for Dependents Not Covered by my Health Insurance Plan? Yes. Qualified medical expenses include unreimbursed medical expenses of the accountholder, his or her spouse, or dependents.

Can you use HSA for house down payment?

Health savings accounts

HSA funds can also be withdrawn for non-medical expenses like buying a home or paying with a larger down payment. The withdrawal amount is subject to a 20% early withdrawal penalty and considered taxable income.

What can I spend HSA money on?

You can use HSA funds to pay for deductibles, copayments, coinsurance, and other qualified medical expenses. Withdrawals to pay eligible medical expenses are tax-free. Unspent HSA funds roll over from year to year, allowing you to build tax-free savings to pay for medical care later.

What is the last month rule for HSA?

Last-month rule.

Under the last-month rule, if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers), you are considered an eligible individual for the entire year.

What is the penalty for over contributing to an HSA?

What happens if I contribute more than the IRS annual maximum? If your HSA contains excess or ineligible contributions you will generally owe the IRS a 6% excess-contribution penalty tax for each year that the excess contribution remains in your HSA. It is recommended you speak with a tax advisor for guidance.

What is the disadvantage of dependent care FSA?

Potential drawbacks of a Dependent Care FSA
  • FSAs are use-it-or-lose-it accounts. The funds you contribute don't roll over from plan year to year. ...
  • Not all employers offer Dependent Care FSA employee assistance program options.
  • You'll need to make sure all of your expenses qualify.

Do you lose money in dependent care FSA?

Dependent care FSA rules are subject to a "use it or lose it" requirement, which means participants must forfeit any unused funds remaining in their account at the end of the plan year and grace period (if a grace period is provided).

Does a nanny count for dependent care FSA?

(Note that both the agency fees and employment taxes for a nanny can qualify as a dependent care FSA expense.) In some cases, the nanny or other caregiver will not be a household employee, and these employment tax obligations will not apply.

Can you use HSA at Sephora?

No, Sephora does not accept FSA or HSA cards in-store or online at However, if you happened to buy FSA eligible sunscreen from Sephora, save your receipt and reimburse yourself!

Is sunscreen a HSA?

Sunscreen: HSA Eligibility. Sunscreen is eligible for reimbursement with flexible spending accounts (FSA), health savings accounts (HSA), and health reimbursement accounts (HRA). They are not eligible for reimbursement with dependent care flexible spending accounts and limited-purpose flexible spending accounts (LPFSA) ...

Can I buy Gatorade with my HSA card?

Rehydration sports drinks, such as Gatorade, and solution with dietary supplements other than electrolytes are not eligible.

Is it better to pay daycare with FSA?

The main benefit of an FSA is that the money set aside in the account is in pretax dollars, thus reducing the amount of your income that is subject to taxes. For someone in the 24% federal tax bracket, this income reduction means saving $240 in federal taxes for every $1,000 spent on dependent care with an FSA.

Are diapers and baby wipes FSA eligible?

Diapers are not eligible for reimbursement with flexible spending accounts (FSA), health savings accounts (HSA), health reimbursement arrangements (HRA), dependent care flexible spending accounts (DCFSA) or limited-purpose flexible spending accounts (LPFSA).

What happens to dependent care FSA if not used?

The IRS created the "use or lose" rule, which states that all money left in your FSA is forfeited after the benefit period ends . If you don't use all of your FSA funds during the benefit period, you risk losing money.