Do you want to save up to $2,200 on childcare costs next year?

Updated 10/27/25 to reflect changes for 2026 and to include the registration link to a live webinar on this topic on Monday, November 10, 2025 at 5pm CT.

Headlines about saving money tend to catch people's attention. And in this case at least, it's also easy! If your employer offers an employee benefit called a Dependent Care Flexible Spending Accounts (DCFSA), you can save up to $2,200 on childcare costs next year!

What's the catch?

Your employer has to offer this benefit. If you're Active Duty or work for the federal government, it's available to you! Visit FSAfeds.gov to learn more and enroll. Many other companies also offer DCFSAs as an employee benefit.

How does it work?

You have to elect how much to fund (up to $7,500) during your employer's open enrollment season. For DoD/DoW, that's November 10 through December 8, 2025 to use the benefit in 2026. The amount you elect is deducted from your paycheck pre-tax and is set aside in the DCFSA. When you incur childcare expenses during 2026, you submit your receipts for reimbursement. When reimbursed, you receive the full value of the expenses (up to $7,500) without any tax withholdings or taxes due.

As with anything tax-related, there are conditions and requirements:

• Both parents must work or be a full-time student to be eligible for the tax deductions.

• You must incur eligible expenses for your dependent(s). This is most commonly used for childcare for kids under the age of 13, but expenses for certain disabled dependents are eligible too.

• The daycare expenses must also be incurred in order for the caregivers to work or study. Sorry, a babysitter for a date night-- while much needed and deserved-- doesn't count! However, full-time daycare, a nanny, or summer day camps are all eligible. For school-aged kids, before care and after care expenses are also eligible.

• This is a "use or lose" benefit. You must use the entire $7,500 (or other amount you selected) during the benefit period or you forfeit the unused amount. Most employers' standard benefit periods run from January 1 through December 31, and some employers (including the federal government) allow an additional grace period through March 15 of the following year. (Employers whose benefit periods are different from the calendar year, such as July 1 - June 30, will have different deadline dates.)

How does this save us $2,200 on childcare costs?

For a family in the 22% federal tax bracket (Married Filing Jointly and earning about $133,000 through $238,000 in 2025), you get a 22% savings on the $7,500 you put into the DCFSA. That 22% savings means $1,650 more in your pocket. You also saved the 7.65% FICA tax (Social Security and Medicare) on that same $5,000, which means $573.75 more in your pocket. That's $2,223.75 saved, if you don't pay state tax on earned income, such as Tennessee residents (and residents of AK, FL, NH, NV, SD, TX, WA, and WY). If you do pay state income tax, your savings will be higher.

If your household income is in the $81,000 - $133,000 range, your savings will be a bit less (12% federal tax savings plus 7.65% FICA savings means $1,473.75 in savings- not bad!). And for households with income in the $32,000 - $81,000 range, your savings will be about $1,323.75.

My experience using the DCFSA

I used the DoD's DCFSA for our family's 2024 childcare expenses, and I found it to be a straightforward, smooth process. The time required to use it probably added up to between 2 and 3 hours for the entire year- that includes opting in during the open enrollment periods, completing the reimbursement forms, and submitting the reimbursement requests online. Some especially busy parents will decide not to deal with the additional administrative headache, but for most families, the savings of more than $700 per hour of effort is well worth it!

How to learn more

If reading isn't your learning style or the above makes your head spin, join me for a live webinar about the DCFSA on Monday, November 10, 2025 at 5pm CT via Zoom. Please register for the live webinar (and to receive the replay). Bring your questions- I love interactive sessions!