Dependent care FSA limit 2026: $7,500

The new limit

$7,500 from 2026.

Section 70404 of Public Law 119-21 raised the amount of employer-provided dependent care assistance that can be excluded from income to $7,500, or $3,750 for a married person filing separately, for tax years beginning after December 31, 2025. For 2025 the maximum was $5,000. Most people use it through a dependent care flexible spending account: you elect an amount, it comes out of your pay before tax, and you are reimbursed for care costs. Employer-paid care and employer-sponsored daycare count toward the same limit.

The law changed the ceiling; your employer’s plan sets its own. Check whether yours adopted $7,500 for 2026 before electing it.

What it covers

The same care, for the same people, as the credit.

Publication 503 applies the same tests to dependent care benefits as to the child and dependent care credit. The care must let you, and your spouse if married, work or look for work, and it must be for a qualifying person: a dependent child under 13, or a spouse or dependent unable to care for themselves who lived with you more than half the year. Day care, preschool, before- and after-school care, and day camps can count; kindergarten tuition, overnight camps, summer school, and tutoring do not.

The other limits

Earned income caps it too.

The amount you can exclude is the smallest of five numbers, Publication 503 says: the benefits you received, your qualified expenses, your earned income, your spouse’s earned income, and your plan’s maximum. A couple where one spouse earns $4,000 cannot exclude more than $4,000. The benefits are reported on your Form W-2, and Part III of Form 2441 figures the exclusion. Elect what you are confident you will spend: FSA money left unused after the plan year, and any grace period your plan offers, is generally forfeited.

The FSA and the credit, together

One limit, shared.

Dependent care benefits that are excluded from income reduce the $3,000 or $6,000 limit for the credit, and the expenses they paid cannot be counted again. With $7,500 in an FSA and two children, the $6,000 credit limit falls to zero. With $5,000 in an FSA, $1,000 is left for the credit.

Which helps more depends on income. Money in the FSA avoids federal income tax at your top rate and, generally, Social Security and Medicare taxes of 7.65%. The credit, from 2026, is 50% at the lowest incomes, 35% for most middle incomes, and 20% at the top. For a married couple in the 22% bracket with AGI under $150,000 and two children, $7,500 in the FSA saves about $2,224 (29.65%), against $2,100 from $6,000 of expenses through the credit at 35%. In the 12% bracket the FSA saves 19.65%, about $1,474, and the credit usually wins, as long as there is enough income tax for it to offset. The care credit calculator takes FSA benefits as an input, so you can test a split.

At open enrollment

A short checklist.

1. Estimate 2026 care costs month by month, including summer day camps.
2. Check your plan’s 2026 maximum and whether it has a grace period.
3. If married filing jointly, the $7,500 is for the couple together, not per spouse: coordinate if both employers offer an FSA.
4. Run the credit at your expected income with and without the FSA.
5. Keep each provider’s name, address, and taxpayer identification number; Form 2441 needs them either way.