2018 Dependent Care FSA Limit
For 2018, the Dependent Care FSA Limit figures are $5,000 (Exclusion limit) and $2,500 (Exclusion limit, married filing separately).
Effective 2018-01-01Source: Publication 15-B (2018), Employer's Tax Guide to Fringe Benefits (IRS)Verified 2026-09-03
Compared with 2017
Every figure on this page is unchanged from 2017.
| Item | 2017 | 2018 | Change |
|---|---|---|---|
| Exclusion limit | $5,000 | $5,000 | +$0 (+0.0%) |
| Exclusion limit, married filing separately | $2,500 | $2,500 | +$0 (+0.0%) |
Who it applies to
Employees who participate in a dependent care flexible spending account or a written dependent care assistance program offered by their employer.
What changed this year, and why
For 2018, the maximum amount an employee may exclude from gross income under an employer's dependent care assistance program (including a dependent care FSA) is $5,000 per year.
Common questions
- What is the dependent care FSA limit for 2018?
- An employee may exclude up to $5,000 of employer-provided dependent care benefits from gross income for 2018. This is the maximum amount that can be set aside through a dependent care FSA on a pre-tax basis for the year.
- Does the $5,000 limit apply per parent or per child?
- The $5,000 limit applies per household (per tax return), not per child. If both spouses have access to dependent care FSAs through their employers, the combined exclusion across both accounts cannot exceed $5,000.
What counts as a dependent care benefit
For purposes of a dependent care FSA, the IRS defines three categories of benefits. First, amounts your employer paid directly to you or to the care provider for the care of your qualifying person while you work. Second, the fair market value of care in a daycare facility provided or sponsored by your employer. Third, pre-tax contributions you made under a dependent care flexible spending arrangement. Even though your salary may have been reduced to pay for these benefits, the amounts are treated as dependent care benefits rather than ordinary wages. If you received benefits as an employee, the total is reported on your Form W-2; benefits received as a partner are shown on Schedule K-1. You enter the total on Form 2441 to determine how much you can exclude from income. If your employer sponsors a qualified plan you may be able to exclude the benefits; your employer can tell you whether the plan qualifies. Note that total benefits excluded cannot exceed the overall cap of $5,000, which is one of the five limiting amounts.
Dependent care benefits in- clude: 1. Amounts your employer paid directly to either you or your care provider for the care of your qualifying per- son while you work, 2. The fair market value of care in a daycare facility pro- vided or sponsored by your employer, and 3. Pre-tax contributions you made under a dependent care flexible spending arrangement.
Publication 503 (2018), Child and Dependent Care Expenses (IRS)
Your exclusion is the smallest of five amounts
The IRS caps the amount of dependent care benefits you can exclude from income using a five-part test. Your exclusion is the smallest of: the total dependent care benefits you received during the year, the total qualified expenses you incurred during the year, your earned income, your spouse's earned income, or $5,000 ($2,500 if married filing separately). This means even if you contributed the full $5,000 to your dependent care FSA, you can exclude only up to the smallest of these five amounts. If your spouse had no earned income during the year, for example, your exclusion would be limited to zero regardless of how much you contributed or spent on care. The definition of earned income for this exclusion is the same as the definition used when figuring the credit, except it does not include any dependent care benefits you receive. You must complete Form 2441, Part III, to calculate your exclusion and determine whether any excess benefits must be included in your income.
The amount you can exclude or deduct is limited to the smallest of: 1. The total amount of dependent care benefits you re- ceived during the year, 2. The total amount of qualified expenses you incurred during the year, 3. Your earned income, 4. Your spouse's earned income; or 5. $5,000 ($2,500 if married filing separately).
Publication 503 (2018), Child and Dependent Care Expenses (IRS)
A spouse with no earned income can wipe out the benefit
For the dependent care credit, the IRS limits how much work-related expense you can count based on earned income. If you are single at year-end, your expenses can't exceed your earned income for the year. If you are married at year-end, the limit is the smaller of your or your spouse's earned income. This rule matters for FSA participants because the same earned income concept applies when figuring the exclusion: your spouse's earned income is one of the five amounts that cap the exclusion. If your spouse had zero earned income for the year, the exclusion could be reduced to zero even if you had substantial qualified expenses and benefits. For married couples, the spouse's earned income for the entire year is used, even if you were married for only part of the year. Earned income for this purpose is defined under the rules for the credit, except that dependent care benefits you receive are not counted. You must have earned income to claim either the credit or the exclusion; without it, the benefit may be lost entirely.
Earned Income Limit The amount of work-related expenses you use to figure your credit can't be more than: 1. Your earned income for the year if you are single at the end of the year, or 2. The smaller of your or your spouse's earned income for the year if you are married at the end of the year.
Publication 503 (2018), Child and Dependent Care Expenses (IRS)
Which child or adult the care has to be for
To claim the dependent care credit, the care must be for one or more qualifying persons who are identified on Form 2441. A qualifying person is generally your qualifying child who is your dependent and who was under age 13 when the care was provided, your spouse who wasn't physically or mentally able to care for himself or herself and lived with you, or a person who wasn't able to care for himself or herself and lived with you for more than half the year. The care must meet this test for the expenses to count toward the credit or the FSA exclusion. You must list each qualifying person on Form 2441 with their name and taxpayer identification number, typically a Social Security number. If the care was for someone who doesn't meet these requirements, the expenses don't qualify and the FSA contributions used for that care cannot be excluded from income.
Qualifying Person Test. The care must be for one or more qualifying persons who are identified on Form 2441.
Publication 503 (2018), Child and Dependent Care Expenses (IRS)
Using the FSA shrinks the dependent care credit
If you exclude dependent care benefits from your income, those excluded benefits have two effects on the dependent care credit. First, they aren't included in your work-related expenses when figuring the credit. Second, they reduce the dollar limit available for the credit. This means using a dependent care FSA can shrink the credit you're eligible for, because the same expenses can't be used for both the exclusion and the credit. You must choose which provides the greater tax benefit. If you contributed $5,000 to the FSA and used it all for qualifying care, you can exclude that amount from income, but those expenses don't count toward the credit. The credit is then calculated on any remaining qualified expenses above the FSA amount, subject to the reduced dollar limit. Most taxpayers find the FSA exclusion more valuable than the credit, but you should compare both options based on your specific situation.
Effect of exclusion on credit. If you exclude dependent care benefits from your income, the amount of the exclu- ded benefits: 1. Isn't included in your work-related expenses; and 2. Reduces the dollar limit, discussed later.
Publication 503 (2018), Child and Dependent Care Expenses (IRS)
The statement your employer must give you, and going over the cap
Your employer must give you a Form W-2 or similar statement showing in box 10 the total amount of dependent care benefits provided to you during the year under a qualified plan. If the benefits exceed $5,000, your employer will also include the excess in your wages shown on your Form W-2 in box 1. This means any amount over $5,000 is treated as taxable wages subject to income tax and employment taxes. You should review your Form W-2 to confirm the amount in box 10 matches your FSA contributions and any other dependent care benefits you received. If box 10 shows more than $5,000, check box 1 to see whether the excess was included in wages. When you file your return, you report the total benefits on Form 2441, Part III, and calculate how much you can exclude. Any benefits over the $5,000 limit that were not already included in wages by your employer must be added to your income on your tax return.
Your employer must give you a Form W-2 (or similar statement), showing in box 10 the total amount of dependent care benefits provided to you during the year under a qualified plan. Your employer will also include any dependent care benefits over $5,000 in your wages shown on your Form W-2 in box 1.
Publication 503 (2018), Child and Dependent Care Expenses (IRS)
Care paid for late does not count toward the limit in the year the care happened
For a Dependent Care FSA in 2018, what matters is the year you actually pay the provider, not the year the care took place. If you incurred care costs in 2018 but did not pay them until 2019, those costs cannot be counted toward your 2018 exclusion limit of $5,000. You may be able to claim a credit for them on your 2019 return, but they do not reduce or use up any of your 2018 benefit. Conversely, expenses from 2017 that you paid in 2018 are not treated as 2018 work-related expenses for the credit, though a separate calculation may let you claim an additional credit for them on your 2018 return. In short, the timing of payment governs which year the expense belongs to, so plan reimbursements and bill payments before the end of the calendar year if you want them to count against that year's $5,000 cap.
Expenses not paid until the following year. Don't count 2017 expenses that you paid in 2018 as work-rela- ted expenses for 2018. You may be able to claim an addi- tional credit for them on your 2018 return, but you must figure it separately. See Payments for prior year's expen- ses under Amount of Credit, later. If you had expenses in 2018 that you didn't pay until 2019, you can't count them when figuring your 2018 credit. You may be able to claim a credit for them on your 2019 return.
Publication 503 (2018), Child and Dependent Care Expenses (IRS)
The exclusion is claimed on the same form as the credit, in a different part
The exclusion for 2018 Dependent Care FSA benefits is claimed on the same tax form used for the child and dependent care credit, but in a separate section of that form. Specifically, you must complete Part III of Form 2441 to claim the exclusion. This is the same form where you would figure the credit in Part II. If you are self-employed and receive benefits from a qualified dependent care benefit plan, you are treated as both employer and employee; instead of an exclusion from wages, you would take a deduction on the appropriate schedule (Schedule C, E, or F), but you still use Form 2441 to figure the amount. The $5,000 exclusion limit applies regardless of whether you claim it as an exclusion or a deduction.
To claim the exclusion, you must complete Part III of Form 2441.
Publication 503 (2018), Child and Dependent Care Expenses (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
Publication 15-B (2018), Employer's Tax Guide to Fringe Benefits (IRS)
- Exclusion limit
An employee can generally exclude from gross income up to $5,000 of benefits received under a dependent care assistance program each year.
- Exclusion limit, married filing separately
Dependent care assistance Exempt3 up to certain limits, $5,000 ($2,500 for married employee filing separate return).