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An offering of the BASE® 125 Cafeteria Plan, the Dependent Care
Assistance Plan, or DCAP, is a pre-tax account that is funded from your
employee's paycheck on a pre-tax basis. The funds in this account, however, are designated funds to reimburse your
employee for dependent care costs on a pre-tax basis.
Annual maximum amounts for dependent care are set on a federal level, so
employees are able to have a maximum of $5,000 deducted on a pre-tax basis if
married filing a joint income tax return. If filing single or married filing separately,
they can elect to have up to $2,500 deducted from their paycheck on a pre-tax basis.
In order for employees to qualify for a DCAP program, they must meet the following criteria:
- Must remain actively employed by current employer.
- Childcare provider must claim payments as income on their tax return.
- Child (children) must be under 13 years of age and considered a dependent for tax return purposes. If child turns 13 during the plan year, expenses for that child are no longer eligible for reimbursement under the plan.
- In order to qualify for DCAP, a spouse or dependent over
13 years of age must be incapable of self-care and regularly spend at least eight hours per day in
the employee's home
(i.e. an invalid parent).
- Care provider may not be a minor child or dependent for income tax purposes (i.e. an older child).
- Services must be for the physical care of the child, not for education, meals, etc.
- Overnight camps are not eligible for reimbursement.
- This is a pay-as-you-go account or an “accrual” account.
Employer does not advance any money.
- Expenses paid for Kindergarten are not eligible,
however expenses paid for pre-school programs and
before- and after- school care and programs are eligible
for reimbursement.
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