The formulas
- Dollar limit = $7,500 ($3,750 if married filing separately)
- Earned income limit = your earned income if unmarried, else the lesser of yours and your spouse
- Excludable = lesser of assistance, dollar limit and earned income limit
How it works
Employer dependent care assistance, such as a dependent care FSA, is excludable under section 129 up to a dollar limit and up to the earned income of the employee, or of the lower-earning spouse if married. Public Law 119-21 raised the dollar limit in the statute from $5,000 to $7,500 ($2,500 to $3,750 for separate returns); the tool uses the $7,500 figure for 2026.
The limit is per household, not per child. Amounts above the limit are included in wages. Section 21(c) reduces the expense limit for the child and dependent care credit by the amount excluded under section 129, so the same dollars do not count twice. A spouse who is a full-time student or incapable of self-care is treated as having earned income of $250 a month for one qualifying individual or $500 a month for two or more (section 21(d)(2)); enter that deemed amount if it applies.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
Is the limit per child?
No. One limit applies to the household for all qualifying dependents.
Can I use the FSA and the credit?
Both are allowed, but the same dollars cannot count twice. The excluded amount reduces the expenses for the credit.
What if my spouse has no earnings?
The limit is zero unless the spouse is a full-time student or incapable of self-care, where section 21(d)(2) deems earned income of $250 or $500 a month.
Sources
- 26 U.S.C. 129 Dependent care assistance programs, Cornell LII
- 26 U.S.C. 21 Expenses for household and dependent care services necessary for gainful employment, Cornell LII
Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.