Dependent Care FSA and Commuter Benefits Explained

Two of the most overlooked benefits at work help with costs you already pay: child or adult care while you work, and getting to work. Both can let you pay with money that isn't taxed as wages. Here's how they work, using IRS rules.

What is a dependent care FSA?

A dependent care FSA is a separate account from a health FSA. It's for care costs, not medical bills. IRS Publication 15-B calls it a dependent care assistance program (DCAP): a written employer program that pays for (or pays you back for) care of a qualifying person so that you can work.

How much can I put in?

For 2026, IRS Publication 15-B says you can generally leave out of your income up to $7,500 a year in dependent care benefits ($3,750 if you're married and file a separate return). The IRS notes this limit went up from $5,000 for the 2026 tax year.

Two more limits apply:

• The amount can't be more than your earned income, or your spouse's if that's lower (Publication 15-B).
• Check your enrollment materials for any limit your own plan sets.

The figures above are for 2026. Before you choose a 2027 amount, confirm the 2027 limit in your enrollment materials or on IRS.gov.

Who counts as a qualifying person?

IRS Publication 503 (2025) says a qualifying person is:

• Your child who is your dependent and was under age 13 when the care was provided, or
• Your spouse, or certain other dependents, who can't physically or mentally care for themselves and lived with you for more than half the year.

What costs count?

Publication 15-B says the rules are basically the same as the tests for the child and dependent care tax credit in Publication 503. The care must let you (and your spouse, if married) work or look for work. Examples from Publication 503 (2025):

Can I also take the child care tax credit?

Not for the same dollars. IRS Publication 503 says any dependent care benefits you leave out of income must be subtracted from the expense limit you use for the credit. Publication 503 (2025) gives that expense limit as $3,000 for one qualifying person or $6,000 for two or more. Which choice saves more depends on your taxes, so a tax professional can help.

What are commuter benefits?

IRS Publication 15-B calls these qualified transportation benefits. They cover:

• Transit passes (bus, rail, or ferry passes, tokens, or fare cards)
• Rides in a commuter highway vehicle (a vanpool vehicle that seats at least six adults, not counting the driver)
• Qualified parking at or near work, or near where you catch transit or a carpool. Parking near your home doesn't count.

Employers can provide these directly or let you pay pre-tax through payroll (Publication 15-B calls this a compensation reduction agreement).

How much can I set aside for commuting?

For 2026, Publication 15-B lists these monthly limits:

As of November 1, 2026, the IRS had not yet announced the 2027 commuter limits. Check IRS.gov or your enrollment materials.

One change for 2026: Publication 15-B says a 2025 law (P.L. 119-21) permanently ended the tax-free bicycle commuting reimbursement for tax years after 2025.

Tips for choosing an amount

• Add up what you really pay. Use last year's daycare bills or monthly transit costs as a starting point.
• Ask about leftover money. Ask HR what happens to any unused dependent care FSA or commuter money in your plan.
• Keep receipts. Publication 15-B says commuter reimbursement plans require you to show proof of the cost before you're paid back. Keep your care receipts too, and ask HR what proof your plan needs.
• Life changed? A new baby, a new daycare, or a move can matter. See Life changes and special enrollment.

Made-up example: Jordan pays $600 a month for after-school care for an 8-year-old so Jordan can work. That's $7,200 a year, under the 2026 limit of $7,500, so Jordan elects $7,200 in the dependent care FSA. (These numbers are made up.)