In a world of COVID-19, here’s how TASC recommends parents approach dependent care eligible expenses. All qualifying dependent care expenses must satisfy a three-part test and begins with the care being provided to a dependent.
The next two portions are a bit more nuanced, and in a work-from-home world, those nuances are the difference between what is a qualifying expense and what is not.
Click Learn More for additional information about the definition of care and how it applies to virtual summer camps.
TASC offers its guidance based upon the wealth of its experience as an employer and as a benefit administrator. It is not legal or tax advice and should not be taken as such but is offered to prompt knowledgeable inquiry of your plan professionals and provoke thoughtful plan decision making.
The term “care” is generally considered to be an activity for the primary purpose of maintaining the “wellbeing and protection” of the dependent. Hence, school tuition is not a qualifying dependent care expense as the activity is primarily for the purpose of educating. But, an incidental expense related to reading tutoring as a part of a day care program would likely be considered to be qualifying.
In a work-from-home environment, when dependents also are home, who is providing care? The parent.
When the parent pays to enrolls child in a day camp, who is providing care during the child’s camp attendance? If the enrollment is to ensure that when the parent is working, someone is maintaining vigilance over the child’s activities and, perhaps, providing some alerts as to when that is not the case, is that care? Arguably, if the expense is for the primary purpose of maintaining the “wellbeing and protection” of a child and would otherwise meets the other two tests, therefore, yes this is an eligible expense.
Does the situation change if the vigilance is provided by a person via an online platform with mutual audio and visual functions? Arguably, no.
In all cases, the facts and circumstances of each situation will determine whether the expense is eligible. A parent, in submitting a claim in a Dependent Care Assistance Plan for reimbursement of the expense attests to the fact that the expense meets all three tests.
A list of the most common dependent care expenses are listed below with an indicator of what expenses are considered eligible. All family situations are different so we recommend consulting with a tax advisor on specific questions if your expenses does not fit into one of these categories.
Download a full list of Dependent Care FSA Eligible Expenses or reference the Eligible Expense table below
|Child Care Expense||Eligible?|
|Activity Fees (Piano Lessons, Dance Class)|
|Babysitting, in your home or someone else’s|
|Babysitting by your relative who is not a tax dependent|
|Babysitting while you or your spouse are NOT working, looking for work, or attending school|
|Babysitting by your tax dependent|
|Before or after school program|
|Child care supplies (diapers, formula, clothing)|
|Child Care Provider discount or coupon|
|Educational, learning or study skills services|
|Extended care that is a supervised program before or after regular school hours|
|Household services (housekeeper, maid, cook, etc.)|
|Housekeeper who cares for child (only portion of payment attributable to work-related child care)|
|Late payment fees|
|Meals, food or snacks|
|Incidental Fees (eligible only when incidental to and inseparable from the fee for care)|
|Indirect Fees (may be eligible when the expense is required to obtain care and the care has been received such as agency fee, application fee, hold-the-spot fee, placement fee or deposit)|
|Late pickup fees when attributed to care of a child|
|Private school tuition for kindergarten and up|
|Registration fees (required for eligible care, after actual services are received)|
|Registration fees (required for eligible care, prior to actual services being received)|
|Summer Day Camp|
|Sick child care|
|Transportation to and from eligible care provided by your care provider|