The simple version

Your employer may offer a benefit that can quietly save your household around $1,400 a year on child care costs, including summer camp, and most families either do not know about it or miss the window to sign up. It is called a dependent care flexible spending account, or dependent care FSA, and it works by letting you set aside up to $5,500 per year in pre-tax dollars before that money ever hits your paycheck.

The catch is that you have to elect it during your employer's open enrollment period, and whatever you contribute must be spent on qualifying expenses within the plan year or you forfeit it. That use-it-or-lose-it rule is where families get burned. Summer camp registration fees, daycare, and after-school programs all qualify, so if you are currently paying for any of those out of your regular checking account, you are paying with after-tax dollars and leaving real money on the table.

The numbers

• $5,500: the 2026 maximum contribution to a dependent care FSA for most filers; $2,750 for married filing separately (IRS Publication 503, irs.gov)
• $5,000: the limit if your employer plan caps contributions at the pre-2025 statutory ceiling, which some plans still use (IRS Publication 503, irs.gov)
• Up to $3,000 (one child) or $6,000 (two or more children): the expense ceiling for the separate Child and Dependent Care Tax Credit, which is a different benefit and can sometimes be used alongside the FSA (IRS Publication 503, irs.gov)
• 20% to 35%: the credit rate for the Child and Dependent Care Tax Credit, depending on your adjusted gross income (IRS Publication 503, irs.gov)
• Roughly 22% to 24%: the federal marginal tax bracket for a household earning $75,000 to $100,000 in 2026, meaning $5,500 in pre-tax FSA contributions saves approximately $1,210 to $1,320 in federal income tax alone (IRS Revenue Procedure 2025-28, irs.gov)
• Add state income tax savings of 4% to 6% for most states, and the total benefit on a $5,500 contribution reaches $1,320 to $1,650 depending on your state (IRS, treasury.gov)

How a dependent care FSA actually works

A dependent care FSA is not a tax deduction you claim at filing time. It is a payroll reduction. Before each paycheck is calculated, your elected contribution is pulled out of your gross wages and placed into a separate FSA account. Because it never registers as income to you, it is never subject to federal income tax, Social Security tax (6.2%), or Medicare tax (1.45%). That last part is often overlooked: the FICA savings alone add roughly $420 on a $5,500 contribution.

Qualifying expenses include day camps (including specialty sports and arts camps), daycare, after-school programs, and care for a qualifying child under age 13. Overnight camps do not qualify. The camp or care provider does not need to be a licensed facility in most cases, but you will need their tax ID number at filing time to substantiate the expense.

The enrollment window is the critical chokepoint. Most employers tie dependent care FSA enrollment to the annual benefits open enrollment period in the fall, for the plan year beginning January 1. A qualifying life event (new child, change in care provider, marriage, divorce) can open a special enrollment window mid-year, but you cannot simply add an FSA in July because you just learned about it. If your employer's plan year runs July to June, you may still have a window right now. Check with your HR department.

The use-it-or-lose-it rule is IRS policy, not an employer quirk. Any balance remaining at the end of the plan year (or after a grace period your employer may offer) is forfeited. Some plans allow a $640 rollover, and some offer a 2.5-month grace period, but the default is forfeit. This means you should contribute only what you are confident you will spend. For most families paying for summer camp and after-school care through the full year, spending $5,500 is not difficult.

The Real Cost lens for a household spending $7,200 a year on child care

Take a two-parent household earning $95,000 combined, in the 22% federal bracket, living in a state with a 5% income tax. They are paying $600 a month, or $7,200 a year, for a mix of summer camp and after-school care. Without a dependent care FSA, all of that comes from after-tax dollars.

• Annual child care spending: $7,200
• Maximum FSA contribution: $5,500 (the remaining $1,700 is still an out-of-pocket after-tax expense)
• Federal income tax saved (22% bracket): $1,210
• State income tax saved (5%): $275
• FICA saved (7.65% combined employee share): $421
• Total annual tax savings: roughly $1,906
• Over 10 years of using the FSA while the child is under 13: roughly $19,000 in taxes not paid, assuming similar income and tax rates

That $1,906 does not require a different job, a side hustle, or any change in spending behavior. It requires enrolling during open enrollment and submitting receipts. Skipping the FSA because the enrollment form looked complicated is the most expensive paperwork mistake most parents make.

What this means

The dependent care FSA has existed since the 1980s and the contribution limits have moved slowly, but for families in the 22% or 24% federal bracket, the math has not changed: five-figure annual child care costs are now common in most metro areas, and the FSA remains one of the few mechanisms that lets you pay those costs with pre-tax dollars without itemizing your return.

The interaction with the Child and Dependent Care Tax Credit is worth a conversation with a tax preparer. The IRS requires you to reduce the expense base for the credit by whatever you ran through your FSA, so you generally cannot double-dip on the same dollars. For most mid-income households, the FSA saves more per dollar than the credit. For lower-income households, the math can go the other way because the credit rate is higher at lower incomes. Neither is automatic. Both require understanding the rules before open enrollment.

What this is NOT

This is not personalized tax advice for your household. This is not a recommendation on how much to contribute to your specific FSA or whether an FSA is better for your situation than the Child and Dependent Care Tax Credit. This is not a guarantee that your employer's plan follows the IRS maximums rather than a lower plan ceiling. This is not legal or financial advice on how to handle forfeited FSA balances, qualifying expenses disputes, or plan administrator decisions. This is not a substitute for reviewing IRS Publication 503 or speaking with a qualified tax professional before making enrollment decisions.

Sources

• IRS Publication 503, Child and Dependent Care Expenses: https://www.irs.gov
• IRS Revenue Procedure 2025-28 (2026 FSA limits): https://www.irs.gov
• U.S. Treasury, tax benefits for families overview: https://www.treasury.gov