The Pretax Perk Most Parents Skip
A Dependent Care FSA lets you set aside up to $5,000 a year, pretax, through your employer's cafeteria plan to cover daycare, preschool, or after-school care for kids under 13. Because the money never shows up as taxable wages, it skips both federal income tax and the 7.65% FICA payroll tax — a savings rate that beats almost any other way to pay for childcare.
How Much It's Actually Worth
The exact savings depend on your tax bracket: someone in the 22% bracket saves roughly 30 cents on every dollar run through the FSA once payroll tax is included. Since the $5,000 cap is set by law, higher earners with bigger childcare bills still benefit on the first $5,000. This calculator applies your bracket to your costs to show the real annual savings.
Frequently Asked Questions
A pretax account through your employer's plan for up to $5,000 a year of daycare or after-school care costs.
It depends on your bracket — you skip both income tax and 7.65% FICA on money run through the FSA.
You still benefit on the first $5,000; the rest is paid with after-tax dollars or may qualify for a separate tax credit.
※ Estimate only. Contribution limits and tax rules can change — check your plan details and a tax professional for specifics.