WASHINGTON, D.C. – Today, U.S. Senators Richard Burr (R-NC) and Kirsten Gillibrand (D-NY) reintroduced the Child and Dependent Care FSA Enhancement Act, a bill that strengthens dependent care flexible spending accounts (FSAs) for American families by increasing the amount of pre-tax dollars that families can put into these accounts from $5,000 to $7,500. The bill will also index this new cap to inflation so that the value of dependent care FSAs keeps up over time as the cost of child care continues to increase.
“As any working parent knows in this economy, affordable child care is difficult to find. This bill is one way to help American families stretch their dollars further in meeting their dependent care needs, whether it’s for their kids or their elderly parents,” Senator Burr said. “The cost of child care is increasing, and by increasing the amount Americans can put into a dependent care FSA and indexing it to inflation, we will help ensure that these accounts continue to be a meaningful option for families.”
“New York is the least affordable state in the nation when it comes to childcare, which now rivals the cost of sending children to college,” said Senator Gillibrand. “For many families, both parents working, or a single mom going to work to provide for her family isn’t a choice. This bill is a step in the right direction as we work to ease the tax burden for families and help them stretch their dollars further to better meet the demands of paying for care for their child or aging parent.”
Dependent care FSAs currently allow employees to exclude $5,000 from their gross-income to help them cover the expenses associated with child care or adult dependent care. This exclusion from gross income allows families to save money on income and FICA taxes. However, since the $5,000 cap is not indexed to inflation, families are falling more and more behind to the rising costs of care. Increasing the amount that can be excluded and indexing it to inflation would allow families to stretch their hard-earned dollars even further and will ensure that this type of care remains an option for families across our country.