What is Dependent care assistance program?
In short
Employees can exclude from income up to $5,000 a year ($2,500 if married filing separately) of employer-provided dependent care assistance, often through a flexible spending account. The One Big Beautiful Bill Act raises the limit to $7,500 from 2026.
Key takeaways
- Amounts excluded reduce the expenses that can be used for the child and dependent care credit.
- The same rules on qualifying persons and work-related care apply.
- Unused flexible spending account amounts may be forfeited at year-end.
Where it's tested
TCP: Personal Financial Planning — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
An employee receives disability benefits under a policy for which the employer paid all premiums and excluded them from the employee's taxable wages. How are the benefits taxed?