Does the military offer flexible spending accounts?

Does the military offer flexible spending accounts? Yes, the Defense Department offers a special benefit called the Dependent Care Flexible Spending Account (DCFSA) to help military families manage the costs of dependent care. This benefit is available to active-duty service members and reserve component members serving on active Guard and Reserve duty under Title 10 orders. Through a DCFSA, service members can set aside part of their paycheck, before taxes, to cover necessary care services like daycare, after-school programs, and adult day care.

What Is a DCFSA?

A DCFSA is a type of flexible spending account that lets military members set aside pre-tax dollars for dependent care expenses. By enrolling on FSAFEDS.gov, you can elect how much to contribute each month, up to an annual limit of $5,000 per household (or $2,500 if married and filing separately). The contribution comes directly out of your paycheck before taxes, which lowers your taxable income and ultimately saves you money.

Benefits of a DCFSA for Military Families

Using a DCFSA can provide several financial advantages:

1. Tax Savings: One of the main benefits of a DCFSA is the tax savings. Because contributions come from pre-tax dollars, your taxable income is lower, which reduces the amount you owe in federal income taxes, state income taxes (in most cases), and Social Security and Medicare taxes. For example, if you earn $50,000 a year and contribute $5,000 to a DCFSA, your taxable income becomes $45,000, which means you pay less in taxes.
2. Reduced Cost for Dependent Care: Dependent care expenses, like daycare or preschool, can add up quickly. A DCFSA allows you to pay for these expenses with pre-tax dollars, making care more affordable. This is especially helpful for military families who often rely on quality care for young children or other dependents.
3. Simplified Budgeting: Since DCFSA contributions are taken automatically from each paycheck, families can easily budget for known dependent care expenses. This steady contribution method helps families plan for monthly care costs without added stress.

Common Questions About the DCFSA

• Eligibility: The DCFSA is available to service members with a dependent under age 13, or a dependent who is physically or mentally unable to care for themselves. Eligible service members must be active duty or on active Guard and Reserve orders.
• Enrollment Period: You can enroll in a DCFSA during the federal benefits open season, which typically runs from mid-November through mid-December. Additionally, you can enroll outside of open season if you experience a qualifying life event, such as a Permanent Change of Station (PCS) or the birth or adoption of a child.
• Access to Funds: DCFSA funds become available each month through payroll deductions. For example, a January contribution will be available for use in February. Unlike some other flexible spending accounts, you won’t have access to the full year’s election amount at the beginning of the year.
• End-of-Year Spending: DCFSA funds don’t roll over, so it’s essential to spend them by the end of the year. However, you have until March 15 of the following year to incur expenses from the prior plan year and until April 30 to file claims.

How to Enroll

To start using a DCFSA, visit FSAFEDS.gov to enroll during open season or after a qualifying life event. For guidance on how the DCFSA can benefit your family, military members can also meet with a DoD personal financial professional or a MilTax consultant for a free consultation.

In short, the DCFSA is a valuable option for military families looking to manage dependent care expenses while saving on taxes. For more details, visit FSAFEDS.gov.