Here are the key features of a DCFSA:

Tax advantages: Contributions made to a DCFSA are tax-free. This means that the money is deducted from the individual's taxable income, resulting in potential tax savings.

Dependent care expenses: A DCFSA is specifically designed to help individuals cover eligible dependent care expenses. This includes expenses incurred for the care of children under the age of 13, disabled dependents, or elderly dependents who require care to allow the individual to work or actively look for work.

Contribution limits: Each year, the IRS sets a maximum contribution limit for DC SAs. This limit may be adjusted annually and applies to the total amount an individual can contribute to their DCFSA. The maximum contribution limit for a DCFSA is separate from the contribution limit for a Health Care FSA (HCFSA) and is $5,000 per household in 2023.

Qualified expenses: Qualified dependent care expenses that can be reimbursed through a DCFSA include daycare centers, in-home care, before and after-school programs, summer day camps, and certain eldercare services. However, expenses related to education or overnight camps are generally not eligible.

Use-it-or-lose-it rule: Similar to a Health Care FSA, a DCFSA is subject to the "use-it-or-lose-it" rule. This means that any funds remaining in the account at the end of the plan year (or any applicable grace period) generally cannot be carried over to the next year. However, some employers may offer a limited rollover or a grace period to use the funds.