How DCAP can help you
The Dependent Care Assistance Program (DCAP) can help you reduce taxable income by setting aside money from each paycheck — before taxes — to pay for dependent care expenses. The 2021 maximum annual amount is $10,500 per household ($5,250 each if you and your spouse file separate tax returns). This is a new and temporary maximum due to COVID-19.
Here are some ways DCAP can help you:
- Setting aside a portion of your pay in DCAP reduces your annual taxable income and helps you pay for out-of-pocket dependent care expenses.
- DCAP reimburses qualified dependent care expenses so you and your spouse (if married) can attend school or work, or look for work. If you have a stay-at-home spouse, you cannot enroll in the DCAP.
- Eligible expenses include babysitting, daycare, prekindergarten, and registration fees (see our eligible expenses list).
Qualifying dependents include:
- A dependent under age 13 who qualifies as an Internal Revenue Service (IRS) dependent.
- A spouse who is physically or mentally incapable of self-care.
- Any other IRS-recognized dependent who is physically and/or mentally incapable of self-care.