2020 Dependent Care FSA Limit
The 2020 Dependent Care FSA Limit is $5,000.
Effective 2020-01-01Source: Publication 503 (2020), Child and Dependent Care Expenses (IRS)Verified 2026-09-01
Compared with 2019
Every figure on this page is unchanged from 2019.
| Item | 2019 | 2020 | Change |
|---|---|---|---|
| Exclusion limit | $5,000 | $5,000 | +$0 (+0.0%) |
Who it applies to
Employees who participate in employer-sponsored dependent care flexible spending arrangements or receive dependent care assistance under a qualified employer plan for the 2020 tax year.
What changed this year, and why
For 2020, the IRS set the dependent care flexible spending arrangement (FSA) exclusion limit at $5,000. This means employees could exclude up to $5,000 of employer-provided dependent care benefits from their gross income, whether received as reimbursements through a dependent care FSA or as direct payments by the employer under a qualified dependent care assistance program.
Common questions
- How much could employees exclude through a dependent care FSA in 2020?
- In 2020, the maximum amount of dependent care benefits an employee could exclude from income through an employer-sponsored dependent care FSA was $5,000.
What counts as a dependent care benefit
A dependent care benefit is not only money your employer hands over. Three things count, and the third is the one most readers arrive for: pre-tax contributions you made yourself under a dependent care flexible spending arrangement. They are your own salary, redirected before tax, and they still count against the $5,000 exclusion in full. The other two are amounts your employer paid directly to you or to your care provider while you worked, and the fair market value of care given in a facility your employer provides or sponsors - the second of which costs you nothing and is still a benefit for this purpose. Add all three before deciding how much room is left, because the total is what your employer reports and what the exclusion is measured against.
3. Pre-tax contributions you made under a dependent care flexible spending arrangement.
Publication 503 (2020), Child and Dependent Care Expenses (IRS)
Your exclusion is the smallest of five amounts
For 2020, the amount you can exclude from income for dependent care benefits is the smallest of five amounts. First, the total amount of dependent care benefits you received during the year. Second, the total amount of qualified expenses you incurred during the year. Third, your earned income. Fourth, your spouse's earned income. Fifth, $5,000, or $2,500 if you are married filing separately. This means even if you contributed more to your Dependent Care FSA or paid more in care expenses, your exclusion cannot exceed the lowest of these five figures. The $5,000 cap applies per household, not per child, so families with multiple children in care are still limited to this amount. If you are married filing separately, the cap drops to $2,500. If your spouse has little or no earned income, that spouse's earned income becomes the limiting factor and can reduce your exclusion below $5,000. You must complete Part III of Form 2441 to calculate the excludable amount.
$5,000 ($2,500 if married filing separately).
Publication 503 (2020), Child and Dependent Care Expenses (IRS)
A spouse with no earned income can wipe out the benefit
For 2020, the amount of work-related expenses you use to figure your credit cannot be more than your earned income if you are single at the end of the year, or the smaller of your or your spouse's earned income for the year if you are married at the end of the year. This means if one spouse has little or no earned income, that spouse's income becomes the ceiling for your work-related expenses, potentially wiping out the benefit entirely. For purposes of this limit, you must use your spouse's earned income for the entire year, even if you were married for only part of the year. If you are legally separated or married and living apart from your spouse under certain conditions, you are not considered married for purposes of this limit and use only your own income. There is a special rule for student spouses or spouses who are physically or mentally unable to care for themselves, which allows a deemed earned income amount to be used instead of zero. Without that exception, a non-working spouse eliminates your ability to claim the credit.
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 (2020), Child and Dependent Care Expenses (IRS)
Which child or adult the care has to be for
For 2020, to claim the credit for child and dependent care expenses, the care must be for one or more qualifying persons who are identified on Form 2441. A qualifying person is your qualifying child who is your dependent and who was under age 13 when the care was provided. A qualifying person also includes your spouse who was not physically or mentally able to care for himself or herself and who lived with you for more than half the year. Additionally, a qualifying person can be someone who was not physically or mentally able to care for himself or herself, lived with you for more than half the year, and was either your dependent or would have been your dependent except that they received gross income above a certain threshold, filed a joint return, or you could be claimed as a dependent on someone else's return. You must include the name and taxpayer identification number of each qualifying person on Form 2441. The care must be for one or more of these qualifying persons to be eligible for the credit or exclusion. A child who turns 13 during the year qualifies only for the portion of the year before their 13th birthday.
Qualifying Person Test. The care must be for one or
Publication 503 (2020), Child and Dependent Care Expenses (IRS)
Using the FSA shrinks the dependent care credit
For 2020, if you exclude dependent care benefits from your income, those benefits have two effects on the dependent care credit. First, the excluded benefits are not included in your work-related expenses when you calculate the credit. Second, the excluded benefits reduce the dollar limit you can use for the credit. This means that using your Dependent Care FSA to pay for care on a pre-tax basis shrinks the pool of expenses available to claim the credit. The dollar limit for the credit is generally higher than the FSA exclusion limit, but because the FSA amount is subtracted from both your expenses and the dollar limit, you may end up with less credit than you would have without the FSA. Taxpayers should compare the tax savings from the FSA exclusion against the reduction in the credit to determine which approach provides the greater benefit for their situation.
Effect of exclusion on credit. If you exclude dependent
Publication 503 (2020), Child and Dependent Care Expenses (IRS)
The statement your employer must give you, and going over the cap
For 2020, 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. This means if you contributed more than $5,000 to your Dependent Care FSA, the excess is automatically included in your taxable wages in box 1 of your W-2. You should check box 10 of your W-2 to verify the amount of benefits you received. Enter this amount on Form 2441, Part III, line 12. If the amount in box 10 is more than $5,000, you must complete Part III of Form 2441 to figure the taxable portion. The excess over $5,000 is already included in your box 1 wages, so you do not exclude it again. The statement ensures you know exactly how much was contributed on a pre-tax basis and how much, if any, became taxable.
Statement for employee. 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 (2020), 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 503 (2020), Child and Dependent Care Expenses (IRS)
- Exclusion limit
the total amount you can exclude or deduct is limited to $5,000.