Starting January 1, 2026, the One Big Beautiful Bill Act (OBBBA) raised the maximum annual contribution to a Dependent Care Flexible Spending Account (FSA) from $5,000 to $7,500 per household — the first increase to this limit in decades. If your employer offers one, this is one of the most direct tax-optimization moves available to working parents, since dollars go in and come out completely tax-free.
The New 2026 Limits
The 2026 Dependent Care FSA maximum is $7,500 per household, or $3,750 for married individuals filing separately. That’s a $2,500 jump from the 2025 cap of $5,000, and unlike many benefit limits, this one comes from statute (OBBBA), not the usual IRS inflation-adjustment process.
How the Tax Savings Actually Work
Money you put into a Dependent Care FSA is deducted from your paycheck before federal income tax, Social Security, and Medicare tax are calculated. For someone in the 22% federal bracket, contributing the full $7,500 saves roughly $1,650 in federal income tax alone, before counting the 7.65% payroll tax savings on top. That combination usually beats the Child and Dependent Care Tax Credit for most middle- and upper-income earners, though you cannot use the same expenses for both — see our Child Tax Credit guide for how that separate credit works.
What Counts as an Eligible Expense
Eligible expenses include daycare, preschool tuition, before- and after-school care, and summer day camp (not overnight camp) for a dependent child under 13, or for a dependent of any age who can’t care for themselves. The care must allow you (and your spouse, if married) to work or look for work.
Use-It-or-Lose-It Still Applies
Dependent Care FSAs are still subject to the use-it-or-lose-it rule: unlike a Health FSA, there is generally no carryover allowed for dependent care funds, though your employer’s plan may offer a grace period of up to 2.5 extra months to spend down the prior year’s balance. Check your specific plan document before assuming either option applies.
Household Coordination Matters
The $7,500 cap is per household, not per spouse. If both spouses have access to a Dependent Care FSA through separate employers, their combined contributions still cannot exceed $7,500 for the year — over-contributing as a household creates taxable income that has to be unwound at tax time.
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