Dependent Care Reimbursement Accounts
Carnegie Mellon allows full-time benefits-eligible faculty and staff to put aside money from their pay on a pre-tax basis, to cover anticipated dependent daycare expenses while you work or attend school. (NOTE: this account does not pay for medical expenses incurred by your dependents. Use the Health Care Flexible Spending Account to cover those expenses.) Contributing to a Dependent Care Reimbursement Account (DCRA) saves you 25% or more on the money you set aside, depending on your federal tax rate.
Contributing to a DCRA
- Contribute up to $5,000/year. (Minimum contribution is $300/year.)
- Contributions will be deducted in equal amounts each pay period. You may contribute over 12 months or nine months (required for those paid over nine months; no contributions Jun–Aug).
- Expenses cannot be reimbursed in anticipation of contributions. You may only request money that has actually been contributed.
- Qualified dependent care expenses include daycare or sitter fees, before/after school care, summer day camps, and elder care for a parent living in your home. (See Dependent Care Reimbursement IRS Publication #503 [pdf] for a complete list of covered expenses.)
- Only your IRS-qualified dependents (children for whom you are a legal parent/guardian and can be claimed for federal tax purposes) may be covered.
- Children under age 13 or other dependents who are disabled and incapable of caring for themselves are eligible.
- Both parents must be working or attending school to be eligible.
- Expenses must be incurred during the plan year, while you are contributing.
- If you initiate an account mid-year, you can only seek reimbursement for expenses incurred AFTER you enrolled.
- If you increase your contributions due to a life change, additional contributions can only be used for expenses incurred AFTER the event.
- If you stop contributing, you can only use the funds to reimburse claims incurred during your participation.
- Benefits received through the Cyert Center for Early Education, and any other tax-free child care benefits and contributions made to the DCRA, are limited to $5,000 by the IRS. To see how benefits received from the Cyert Center offset the amount you can contribute tax-free to the DCRA, read Child Care Benefits—Tax Implications [pdf].
- The IRS allows you to claim work-related, dependent care expenses when you file your income tax return. You cannot use both the tax credit and the Dependent Care Reimbursement Account for the same expenses.
- The tax regulations regarding this benefit are complicated for those who use the Earned Income Tax Credit. Review the instructions published by the IRS carefully or consult a tax expert for advice.
- Consult a tax professional for information on how DCRA benefits impact tax credits or exemptions for which you may be eligible.