As part of the “One Big Beautiful Bill” (OBBB), effective January 1, 2026, there will be a permanent increase to the annual contribution limit for Dependent Care Assistance Plans (DCAP), also known as Dependent Care Flexible Spending Accounts (Dependent Care FSA). As many of you know, these types of plans are employer-sponsored benefits which allow employees to set money aside on a pre-tax basis to pay for childcare or daycare expenses that are incurred in order for the employee and their spouse to be gainfully employed.
- Money can be set aside on a pre-tax basis to pay for things like day care, before and after school care, preschool or summer day camp for dependent children up to age 13.
- Money can also be set aside on a pre-tax basis to pay for adult day care or adult in-home care for adult children or spouses who are unable to care for themselves due to a physical or mental disability and are claimed as exemptions on a participant’s income taxes.
In 2026, the limit will increase as follows:
- $7,500 for those married, filing taxes jointly or single (up from $5,000)
- $3,750 for those married, filing taxes separately (up from $2,500)
This new limit is not indexed for inflation. This is the first increase since 1986.