DCA (Dependent Care Account) is not extra funds set aside for medical services for your dependents but are funds set aside, pre-tax, for child care services for your dependent.
Who is a Qualifying Person?
Your child and dependent care expenses must be for the care of one or more qualifying persons
- Your qualifying child who is your dependent and who was under age 13 when the care was provided (but see Child of divorced or separated parents or parents
living apart, later);
- Your spouse who wasn't physically or mentally able to care for himself or herself and lived with you for more than half the year; or
- A person who wasn't physically or mentally able to care for himself or herself, lived with you for more than half the year, and either:
- Was your dependent, or
- Would have been your dependent except that:
- He or she received gross income of $4,200 or more,
- He or she filed a joint return, or
- You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2019 return.
What Counts as Eligible Dependent Care?
See the full IRS Publication 503 here
Child and dependent care expenses must be work related to qualify for the credit. Expenses are considered work related only if both of the following are true.
- They allow you (and your spouse if filing jointly) to work or look for work.
- They are for a qualifying person's care.
Working or Looking for Work
To be work-related, your expenses must allow you to work or look for work. If you are married, generally both you and your spouse must work or look for work. One spouse is treated as working during any month he or she is a full-time student or isn't physically or mentally able to care for himself or herself.
Your work can be for others or in your own business or partnership. It can be either full-time or part time.
Work also includes actively looking for work. However, if you don't find a job and have no earned income for the year, you can't take this credit. See You Must Have Earned Income, earlier.
An expense isn't considered work-related merely because you had it while you were working. The purpose of the expense must be to allow you to work. Whether your expenses allow you to work or look for work depends on the facts.
Example 1. The cost of a babysitter while you and your spouse go out to eat isn't normally a work-related expense.
Example 2. You work during the day. Your spouse works at night and sleeps during the day. You pay for care of your 5-year-old child during the hours when you are working and your spouse is sleeping. Your expenses are considered work-related.
Volunteer work. For this purpose, you aren't considered to be working if you do unpaid volunteer work or volunteer work for a nominal salary.
Work for part of year. If you work or actively look for work during only part of the period covered by the expenses, then you must figure your expenses for each day. For example, if you work all year and pay care expenses of $250 a month ($3,000 for the year), all the expenses are work-related. However, if you work or look for work for only 2 months and 15 days during the year and pay expenses of $250 a month, your work-related expenses are limited to $625 (21/2 months × $250).
Temporary absence from work. You don't have to figure your expenses for each day during a short, temporary absence from work, such as for vacation or a minor illness, if you have to pay for care anyway. Instead, you can figure your credit including the expenses you paid for the period of absence.
An absence of 2 weeks or less is a short, temporary absence. An absence of more than 2 weeks may be considered a short, temporary absence, depending on the circumstances.
Example. You pay a nanny to care for your 2-year-old son and 4-year-old daughter so you can work. You become ill and miss 4 months of work but receive sick pay. You continue to pay the nanny to care for the children while you are ill. Your absence isn't a short, temporary absence, and your expenses aren't considered work-related.
Part-time work. If you work part-time, you generally must figure your expenses for each day. However, if you have to pay for care weekly, monthly, or in another way that includes both days worked and days not worked, you can figure your credit including the expenses you paid for days you didn't work. Any day when you work at least 1 hour is a day of work.
Example 1. You work 3 days a week. While you work, your 6-year-old child attends a dependent care center, which complies with all state and local regulations. You can pay the center $150 for any 3 days a week or $250 for 5 days a week. Your child attends the center 5 days a week. Your work-related expenses are limited to $250 a week
Example 2. The facts are the same as in Example 1, except the center doesn't offer a 3-day option. The entire $250 weekly fee may be a work-related expense.
Care of a Qualifying Person
To be work-related, your expenses must be to provide care for a qualifying person.
You don't have to choose the least expensive way of providing the care. The cost of a paid care provider may be an expense for the care of a qualifying person even if another care provider is available at no cost.
Expenses are for the care of a qualifying person only if their main purpose is the person's well-being and protection.
Expenses for household services qualify if part of the services is for the care of qualifying persons. See Household Services, later.
Expenses not for care. Expenses for care don't include amounts you pay for food, lodging, clothing, education, and entertainment. However, you can include small amounts paid for these items if they are incidental to and can't be separated from the cost of caring for the qualifying person. Otherwise, see the discussion of Expenses partly work-related, later.
Child support payments aren't for care and don't qualify for the credit.
Education. Expenses for a child in nursery school, preschool, or similar programs for children below the level of kindergarten are expenses for care.
Expenses to attend kindergarten or a higher grade aren't expenses for care. Don't use these expenses to figure your credit.
However, expenses for before- or after-school care of a child in kindergarten or a higher grade may be expenses for care.
Summer school and tutoring programs aren't for care.
Example 1. You take your 3-year-old child to a nursery school that provides lunch and a few educational activities as part of its preschool childcare service. The lunch and educational activities are incidental to the childcare, and their cost can't be separated from the cost of care. You can count the total cost when you figure the credit.
Example 2. You place your 10-year-old child in a boarding school so you can work full-time. Only the part of the boarding school expense that is for the care of your child is a work-related expense. You can count that part of the expense in figuring your credit if it can be separated from the cost of education. You can't count any part of the amount you pay the school for your child's education.
Care outside your home. You can count the cost of care provided outside your home if the care is for your dependent under age 13 or any other qualifying person who regularly spends at least 8 hours each day in your home.
Dependent care center. You can count care provided outside your home by a dependent care center only if the center complies with all state and local regulations that apply to these centers.
A dependent care center is a place that provides care for more than six persons (other than persons who live there) and receives a fee, payment, or grant for providing services for any of those persons, even if the center isn't run for profit.
Camp. The cost of sending your child to an overnight camp isn't considered a work-related expense. The cost of sending your child to a day camp may be a work-related expense, even if the camp specializes in a particular activity, such as computers or soccer.
Transportation. If a care provider takes a qualifying person to or from a place where care is provided, that transportation is for the care of the qualifying person. This includes transportation by bus, subway, taxi, or private car. However, transportation not provided by a care provider isn't for the care of a qualifying person. Also, if you pay the transportation cost for the care provider to come to your home, that expense isn't for care of a qualifying person.
Fees and deposits. Fees you paid to an agency to get the services of a care provider, deposits you paid to an agency or preschool, application fees, and other indirect expenses are work-related expenses if you have to pay them to get care, even though they aren't directly for care. However, a forfeited deposit isn't for the care of a qualifying person if care isn't provided.
Example 1. You paid a fee to an agency to get the services of the nanny who cares for your 2-year-old daughter while you work. The fee you paid is a work-related expense.
Example 2. You placed a deposit with a preschool to reserve a place for your 3-year-old child. You later sent your child to a different preschool and forfeited the deposit. The forfeited deposit isn't for care and therefore not a work-related expense.
Expenses you pay for household services meet the work-related expense test if they are at least partly for the well-being and protection of a qualifying person.
Definition. Household services are ordinary and usual services done in and around your home that are necessary to run your home. They include the services of a housekeeper, maid, or cook. However, they don't include the services of a chauffeur, bartender, or gardener.
Housekeeper. In this publication, the term “housekeeper” refers to any household employee whose services include the care of a qualifying person.
Expenses partly work-related. If part of an expense is work-related (for either household services or the care of a qualifying person) and part is for other purposes, you have to divide the expense. To figure your credit, count only the part that is work-related. However, you don't have to divide the expense if only a small part is for other purposes.
Example. You pay a housekeeper to care for your 9-year-old and 15-year-old children so you can work. The housekeeper spends most of the time doing normal household work and spends 30 minutes a day driving you to and from work. You don't have to divide the expenses. You can treat the entire expense of the housekeeper as work-related because the time spent driving is minimal. Nor do you have to divide the expenses between the two children, even though the expenses are partly for the 15-year-old child who isn't a qualifying person, because the expense is also partly for the care of your 9-year-old child, who is a qualifying person. However, the dollar limit (discussed later) is based on one qualifying person, not two.
Meals and lodging provided for housekeeper. If you have expenses for meals that your housekeeper eats in your home because of his or her employment, count these as work-related expenses. If you have extra expenses for providing lodging in your home to the housekeeper, count these as work-related expenses also.
Example. To provide lodging to the housekeeper, you move to an apartment with an extra bedroom. You can count the extra rent and utility expenses for the housekeeper's bedroom as work-related. However, if your housekeeper moves into an existing bedroom in your home, you can count only the extra utility expenses as work-related.
Taxes paid on wages. The taxes you pay on wages for qualifying child and dependent care services are work-related expenses. For more information on a household employer's tax responsibilities, see Do You Have Household Employees, later.
Payments to Relatives or Dependents
You can count work-related payments you make to relatives who aren't your dependents, even if they live in your home. However, don't count any amounts you pay to:
1. A person for whom you (or your spouse if filing jointly) can claim as a dependent;
2. Your child who was under age 19 at the end of the year, even if he or she isn't your dependent.
3. A person who was your spouse any time during the year; or
4. The parent of your qualifying person if your qualifying person is your child and under age 13.