This week’s question comes from Casey, an HR director. We have a dependent care flexible spending arrangement (FSA) and one of our employees has asked to be reimbursed for camp costs paid for her son. Can camp costs be reimbursed under a dependent care FSA? Answer: Camp costs can be reimbursed under a dependent care FSA in some circumstances.
FSAs Use Pre-Tax Dollars to Pay Qualified Expenses
Employers may set up FSAs (sometimes called flexible spending accounts) that allow employees to elect to contribute a portion of their pay to their FSA account. The amount paid into the FSA can be used to pay qualifying expenses of the employee. Most plans are set up to pay medical or dependent care expenses. The main advantage is that money is contributed to the plan on a pre-tax basis and is not taxed upon withdrawal if used to pay qualifying expenses.
Summer Camp Costs May Qualify for Reimbursement
While the cost of attending overnight camp does not qualify as an allowable expense, the cost of day camp may qualify as an allowable expense. The day camp costs must meet all the other requirements of §129 of the Internal Revenue Code of 1986 to qualify.
Contact Vision Payroll for Further Information
Contact Vision Payroll today for further information on setting up or maintaining a dependent care FSA.