Another year is here! That means settling down from the holiday season, bundling up in the chilly weather, and of course… budgeting for a successful financial year.
And while budgeting may not be your ideal way to spend your free time, it’s such a crucial activity to perform early in the year to set you and your family up for success.
There are likely many items that go into your budget, but one item may be particularly close to home–Dependent Care. Whether you’re planning out daycare expenses for your little ones, or scheduling appointments for your elder relatives, dependent care can quickly rack up costs that may encounter your budget in unexpected ways throughout the year.
To best plan for dependent care expenses, let’s dive into what dependent care is and some of the major trends to be on the lookout for this year.
What is a Dependent Care?
As a workplace benefit, Investopedia describes “Dependent Care” as “benefits provided by an employer to an employee for use in caring for dependents, such as young children or disabled family members.” This type of care can also apply to elder members of your family who may also be financially or physically dependent on you.
Dependent care is such an important benefit because it often offers a Flexible Spending Account (FSA), paid leave, and/or tax credits that can help an employee make their everyday financial obligations a little more manageable. Plus, offering dependent care is beneficial for employers because the unique benefit offering can be used to attract talent in your field by offering innovative solutions that also demonstrate an employer’s commitment to total family care.
Let’s take a look at some of the top items to be aware of when it comes to dependent care.
5 Things to Know About Dependent Care This Year
- Dependent Care Accounts (DCA)
As referenced above, many Dependent Care benefits come with an FSA to help balance the costs of dependent care services. These special FSAs are commonly referred to as Dependent Care Accounts (DCA). According to Investopedia, “ eligible employees can allocate a portion of their pay to be put into a special flexible spending account to later be reimbursed for qualifying out-of-pocket dependent care expenses.”
- What a DCA Covers
A DCA can be used for both child care or elder care out-of-pocket expenses as well as for any services required for individuals with disabilities that may impact their ability to care for themselves. Covered services can include (but are not limited to) daycare allowances, home care, nursing aides, day camp, and much more. For a full list of DCA/FSA eligible items, visit the FSA Store!
- Contribution Limits and Tax Info for 2023
DCAs are regulated by the IRS, and each year the amount you can contribute is adjusted for inflation. For 2023, the contribution limit is set at $5,000 per household. That means you can contribute a maximum of $5,000 to your DCA within the calendar year. DCA are advantageous because they utilize employees’ pre-tax dollars, allowing employees to save even more without being taxed! Additionally, DCAs work as exemption credits when filing your taxes which can reduce your taxable income by thousands of dollars per year.
- How to Use DCA Funds
Many DCA benefits come with a benefits debit card that makes purchasing quick and easy! You can also easily submit claims by snapping a photo of your receipt and submitting a web claim from any device with an internet connection. You can also set up providers with automated direct payments, eliminating the need for receipts or paperwork. Or, if expenses have already been paid for, you can be reimbursed automatically through check or direct deposit.
- How to Plan for the Future
The beginning of the year is the perfect time to think about how your dependent care expenses will fluctuate throughout the year. For example, will you need to budget more funds in the summer for daycare services? Or perhaps an expected change in assisted living facilities later this year may impact your finances. Taking the time to plan out the “what-ifs” early in the year and allocating your DCA funds will dramatically help you prepare for the future.
Caring for What (and Who) Matters Most
At Clarity Benefit Solutions, we are dedicated to providing innovative solutions that put the quality of care first. That’s why our Clarity Dependent Care Account (DCA) is designed with your loved ones in mind. You can enjoy all the tax benefits and coverages listed above, plus our incredibly easy-to-navigate claim substantiation, Clarity Mobile App, Smart Debit Card, and incredible Customer Support to help you along the way.
Our commitment to quality service means that you can more easily care for what matters most in your life–your loved ones. Explore our full list of benefit solutions or reach out to our customer support team to learn more about how you can get the most out of a Clarity DCA.